##### Table of Contents



_________________________________________________________________________


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




---

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934




|                                            |                               
|------------------------------------------- | ------------------------------
|For the fiscal year ended December 31, 1999 | Commission file number 1-10070

MCN ENERGY GROUP INC.



|                                                                |  |                                      
|--------------------------------------------------------------- |  | -------------------------------------
|                                                               
|                                                               
|                                                               
|                                                               
|Michigan                                                        |  | 38-2820658                           
|                                                               
|(State or other jurisdiction of
	incorporation or organization) |  | (I.R.S. Employer
	Identification No.)
|                                                               
|                                                               
|                                                               
|                                                               
|                                                               
|500 Griswold Street, Detroit, Michigan                          |  | 48226                                
|(Address of principal executive offices)                        |  | (Zip Code)                           

313-256-5500


(Registrants telephone number, including
area code)


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

|                                                  |  |                        
|------------------------------------------------- |  | -----------------------
|                                                  |  | Name of each Exchange  
|Title of each class                               |  | on which registered    
|                                                  |  |                        
|Common Stock, $.01 Par Value Per Share            |  | New York Stock Exchange
|9 3/8% Cumulative Preferred Securities, Series A* |  | New York Stock Exchange
|8 5/8% Trust Originated Preferred Securities**    |  | New York Stock Exchange
|8% FELINE PRIDES                                  |  | New York Stock Exchange
|8 5/8% Trust Preferred Securities***              |  | New York Stock Exchange
|                                                  |  |                        

|    |                                                                                                                                                          
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Issued by MCN Michigan Limited Partnership. The payments of
	dividends and payments on liquidation or redemption are
	guaranteed by MCN Energy Group Inc.
|**  | Issued by MCN Financing I. The payments of dividends and
	payments on liquidation or redemption are guaranteed by MCN
	Energy Group Inc.                 
|*** | Issued by MCN Financing II. The payments of dividends and
	payments on liquidation or redemption are guaranteed by MCN
	Energy Group Inc.                

Securities registered pursuant to Section 12(g) of the
Act:None.

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

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

The aggregate market value of MCN Energy Group Inc. Common Stock,
 $.01 par value per share, held by non-affiliates as of
February 29, 2000 was $2.061 billion based on 85,655,381
outstanding shares and the closing price on that day (New York
Stock Exchange Composite Transactions).

Documents Incorporated by Reference:

None.






---



##### Table of Contents



GLOSSARY



|                            |  |                                                                                                                                                                                                                                                                                                                                                        
|--------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Antrim Gas                  |  | Natural gas produced from shallow wells in the Devonian (Antrim)
	shale formations.                                                                                                                                                                                                                                                                    
|                           
|Capital Investments         |  | MCNs consolidated capital expenditures plus acquisitions
	and MCNs share of capital expenditures of joint ventures,
	less the minority partners share of consolidated capital
	expenditures.                                                                                                                                                        
|                           
|Citizens                    |  | Citizens Gas Fuel Company; a wholly owned natural gas
	distribution subsidiary of MCN in Adrian, Michigan.                                                                                                                                                                                                                                             
|                           
|Cogeneration                |  | The production of electricity and another form of energy, usually
	 steam, from a single fuel source such as natural gas.                                                                                                                                                                                                                              
|                           
|Diversified Energy Group    |  | MCNs Pipelines & Processing, Electric Power,
	Energy Marketing and Exploration & Production businesses.                                                                                                                                                                                                                                               
|                           
|End User Transportation     |  | A gas delivery service historically provided to large-volume
	commercial and industrial customers who purchase natural gas
	directly from producers or brokerage companies. Under
	MichCons customer choice program that began in 1999, this
	service is also provided to residential customers and
	small-volume commercial and industrial customers.
|                           
|FERC                        |  | Federal Energy Regulatory Commission; a federal agency that
	determines the interstate rates and regulations of interstate
	pipelines.                                                                                                                                                                                                                 
|                           
|Gas Gathering               |  | The process of collecting natural gas from gas wells and then
	transporting the gas through pipelines to processing plants or
	major pipelines.                                                                                                                                                                                                        
|                           
|Gas Processing              |  | For MCN, the removal of carbon dioxide and petroleum liquids from
	 natural gas so it meets market quality standards.                                                                                                                                                                                                                                  
|                           
|Gas Storage                 |  | The process of injecting, storing and withdrawing natural gas
	from a depleted underground natural gas field or salt cavern.                                                                                                                                                                                                                           
|                           
|GCR                         |  | Gas Cost Recovery; a process, in effect through 1998, by which
	MichCon, through annual gas cost proceedings before the Michigan
	Public Service Commission, was allowed to recover its reasonable
	and prudent cost of gas sold.                                                                                                                      
|                           
|Intermediate Transportation |  | A gas delivery service provided to producers, brokers and other
	gas companies that own the natural gas, but are not the ultimate
	consumers.                                                                                                                                                                                                          

i



---



##### Table of Contents



GLOSSARY(CONCLUDED)




|                 |  |                                                                                                                                                             
|---------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------
|Methanol         |  | A form of alcohol manufactured from various feedstocks, including
	 natural gas, and used as a solvent, antifreeze and high octane
	fuel.                   
|                
|MCN              |  | MCN Energy Group Inc. and its subsidiaries.                                                                                                                 
|                
|MCNEE            |  | MCN Energy Enterprises Inc., a wholly owned subsidiary of MCN
	that is the holding company of MCNs Diversified Energy
	group subsidiaries.                 
|                
|MichCon          |  | Michigan Consolidated Gas Company; an indirect, wholly owned
	natural gas distribution and intrastate transmission subsidiary
	of MCN.                      
|                
|MichCon Pipeline |  | MichCon Pipeline Co., a wholly owned subsidiary of MichCon that
	engages in pipeline projects through its subsidiaries.                                     
|                
|MPSC             |  | Michigan Public Service Commission; a state agency that
	regulates, among other things, the intrastate aspects of the
	natural gas industry within Michigan.
|                
|Normal Weather   |  | The average annual degree days in MCNs Gas Distribution
	service area during a recent 30-year period.                                                      
|                
|Spot Market      |  | The buying and selling of natural gas on a short-term basis,
	typically month-to-month.                                                                     

Units of Measurement



|     |  |                                                                                                                                                                                                                 
|---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Bcf  |  | Billion cubic feet of gas.                                                                                                                                                                                      
|    
|MBbl |  | Thousand barrels, which is a unit of measurement of oil and other
	 petroleum liquids.                                                                                                                          
|    
|Mcf  |  | Thousand cubic feet of gas.                                                                                                                                                                                     
|    
|MMcf |  | Million cubic feet of gas.                                                                                                                                                                                      
|    
|MW   |  | Megawatts, or million watts of electricity.                                                                                                                                                                     
|    
|/d   |  | Added to various units of measurement to denote units per day.                                                                                                                                                  
|    
|/e   |  | Added to various units of measurement to facilitate comparison of
	 the Btu content between natural gas, crude oil and condensate.
	It assumes a ratio of 6 Mcf of natural gas per barrel of oil or
	condensate.

ii



---

TABLE OF CONTENTS



|           |                                                                                               |  |  |  |  |  |  | 
|---------- | --------------------------------------------------------------------------------------------- |  |  |  |  |  |  | 
|Part I    
|           | Item 1. Business                                                                             
|           | Item 2. Properties                                                                           
|           | Item 3. Legal Proceedings                                                                    
|           | Item 4. Submission of Matters to a Vote of Security Holders                                  
|Part II   
|           | Item 5. Market for Registrants Common Equity and Related Stockholder Matters                
|           | Item 6. Selected Financial Data                                                              
|           | Item 7. Managements Discussion And Analysis of Financial Condition and Results of Operations
|           | Item 7A. Quantitative and Qualitative Disclosures About Market Risk                          
|           | Item 8. Financial Statements and Supplementary Data                                          
|           | Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure 
|Part III  
|           | Item 10. Directors and Executive Officers of the Registrant                                  
|           | Item 11. Executive Compensation                                                              
|           | Item 12. Security Ownership of Certain Beneficial Owners and Management                      
|           | Item 13. Certain Relationships and Related Transactions                                      
|PART IV   
|           | Item 14. Exhibits, Financial Statement Schedule, and Reports on Form 8-K                     
|Signatures



---



TABLE OF CONTENTS

|           |           |  |                                                                                        |        |  |     | 
|---------- | --------- |  | -------------------------------------------------------------------------------------- | ------ |  | --- | 
|           |           |  |                                                                                        | PAGE  
|           |           |  |                                                                                        | NUMBER
|CONTENTS   |           |  |                                                                                        |       
|PART I     |           |  |                                                                                        |       
|          
|          
|          
|          
|           | Item  1.  |  | Business                                                                               |        |  | 1   | 
|          
|          
|          
|          
|           | Item  2.  |  | Properties                                                                             |        |  | 22  | 
|          
|          
|          
|          
|           | Item  3.  |  | Legal Proceedings                                                                      |        |  | 24  | 
|          
|          
|          
|          
|           | Item  4.  |  | Submission of Matters to a Vote of Security Holders                                    |        |  | 26  | 
|          
|          
|          
|          
|PART II    |           |  |                                                                                        |       
|          
|          
|          
|          
|           | Item  5.  |  | Market for Registrants Common Equity and Related
	Stockholder Matters                 |        |  | 27  | 
|          
|          
|          
|          
|           | Item  6.  |  | Selected Financial Data                                                                |        |  | 28  | 
|          
|          
|          
|          
|           | Item  7.  |  | Managements Discussion and Analysis of Financial Condition
	and Results of Operations |        |  | 30  | 
|          
|          
|          
|          
|           | Item  7A. |  | Quantitative and Qualitative Disclosures About Market Risk                             |        |  | 58  | 
|          
|          
|          
|          
|           | Item  8.  |  | Financial Statements and Supplementary Data                                            |        |  | 59  | 
|          
|          
|          
|          
|           | Item  9.  |  | Changes in and Disagreements with Accountants on Accounting and
	Financial Disclosure  |        |  | 116 | 
|          
|          
|          
|          
|PART III   |           |  |                                                                                        |       
|          
|          
|          
|          
|           | Item  10. |  | Directors and Executive Officers of the Registrant                                     |        |  | 117 | 
|          
|          
|          
|          
|           | Item  11. |  | Executive Compensation                                                                 |        |  | 120 | 
|          
|          
|          
|          
|           | Item  12. |  | Security Ownership of Certain Beneficial Owners and Management                         |        |  | 125 | 
|          
|          
|          
|          
|           | Item  13. |  | Certain Relationships and Related Transactions                                         |        |  | 125 | 
|          
|          
|          
|          
|PART IV    |           |  |                                                                                        |       
|          
|          
|          
|          
|           | Item  14. |  | Exhibits, Financial Statement Schedule, and Reports on Form 
	 8-K                     |        |  | 127 | 
|          
|          
|          
|          
|SIGNATURES |           |  | 132                                                                                    |       

iii



---



##### Table of Contents



FORWARD-LOOKING STATEMENTS

This Form 10-K includes forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements involve certain risks and
uncertainties that may cause actual future results to differ
materially from those contemplated, projected, estimated or
budgeted in such forward-looking statements. Factors that may
impact forward-looking statements include, but are not limited
to, the following: (i) the effects of weather and other
natural phenomena; (ii) increased competition from other
energy suppliers as well as alternative forms of energy;
(iii) the capital intensive nature of MCNs business;
(iv) economic climate and growth in the geographic areas in
which MCN does business; (v) the uncertainty of gas and oil
reserve estimates; (vi) the timing and extent of changes in
commodity prices for natural gas, natural gas liquids, methanol,
electricity and crude oil; (vii) the nature, availability
and projected profitability of potential projects and other
investments available to MCN; (viii) conditions of capital
markets and equity markets; (ix) the timing and results of
major transactions; (x) the effects of changes in
governmental policies and regulatory actions, including income
taxes, environmental compliance and authorized rates;
(xi) the timing, nature and impact of Year 2000 activities;
and (xii) the timing and completion of the pending merger.






PART I







ITEM 1. BUSINESS


MCN Energy Group Inc., a Michigan corporation organized in 1988,
is an integrated energy company with approximately $4.2 billion
in assets at December 31, 1999 and revenues of approximately $2.5
 billion in 1999. MCN is primarily involved in natural gas
production, gathering, processing, transmission, storage and
distribution, electric power generation and energy marketing. On
December 31, 1999, MCN and its subsidiaries had 2,970
employees.

On August 2, 1999, MCN announced a significantly revised
strategic direction that includes:



|  |                                                                                                                                        
|- | ---------------------------------------------------------------------------------------------------------------------------------------
| | Focusing on the Midwest-to-Northeast region;                                                                                           
| 
| | Emphasizing operational efficiencies and growth through the
	integration of existing businesses;                                       
| 
| | Retaining its natural gas producing properties in Michigan while
	selling its other exploration and production oil and gas
	properties;
| 
| | Reducing capital investment levels over the next several years to
	 approximately $150 million to $350 million annually.               

Prior to revising its strategic direction, MCNs strategy
was to build a portfolio of diverse, non-operated energy
investments. The prior strategy also included selling all of
MCNs oil and gas properties and having planned capital
investment levels of $600 million to $750 million annually, which
 would be invested primarily in North America.

To achieve the operating efficiencies expected from the new
strategic direction, MCN is reorganizing into the following
business segments: Gas Distribution; Midstream & Supply;
Energy

1



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


Marketing; Power; and Energy Holdings. MCN expects to begin
reporting its operating results based on the new segments in
2000.



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                          
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Gas Distribution is responsible for MCNs regulated
	utility operations. Gas Distribution consists principally of
	Michigan Consolidated Gas Company (MichCon), the largest gas
	utility in Michigan.                                                                                                                                                                                                                                    
| 
| | Midstream & Supply develops and manages MCNs gas
	 producing, gathering, processing, storage and transmission
	facilities within the Midwest-to-Northeast target region. It also
	 integrates all of the companys gas-supply functions,
	including purchasing the commodity itself and aggregating the
	transportation and storage capacity required to deliver the gas
	for the Gas Distribution, Energy Marketing and Power segments.
| 
| | Energy Marketing consists of MCNs non-regulated
	marketing activities primarily to industrial and commercial
	customers, both inside and outside the Gas Distribution
	segments service areas. The segment also provides
	full-service energy solutions to business customers.                                                                                                                                                         
| 
| | Power develops and manages independent electric power
	projects that produce electricity and other useful forms of
	thermal energy, such as steam.                                                                                                                                                                                                                                                                                       
| 
| | Energy Holdings manages and seeks to maximize the value of
	 existing ventures outside MCNs target region. It consists
	of gas gathering and processing investments in major U.S.
	producing basins, as well as non-regional electric power
	ventures.                                                                                                                                                                                  

During 1999, MCN continued reporting through two major business
groups: Diversified Energy and Gas Distribution.

Diversified Energy, operating through MCN Energy
Enterprises Inc. (MCNEE), formerly MCN Investment Corporation, is
 a wholly owned subsidiary of MCN and serves as a holding company
 for MCNs non-utility businesses. MCNEE is involved in the
following segments:



|  |                                                                                                                                                                                                                              
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pipelines & Processing has pipeline, gathering,
	processing and related facilities in major supply areas.                                                                                                                    
| 
| | Electric Power has joint venture interests in electric
	power generation facilities. Electric Power also provides fuel
	management services and supplies gas to power generation
	facilities under long-term sales contracts.
| 
| | Energy Marketing sells premium, reliable bundled energy
	services to large-volume customers and has rights to market-area
	storage capacity. Energy Marketing also sells gas to other gas
	marketers and brokerage companies.
| 
| | Exploration & Production (E&P) is engaged in
	natural gas and oil exploration, development and production.                                                                                                                   

Gas Distribution consists principally of MichCon, a
natural gas utility serving approximately 1.2 million customers
in more than 530 communities throughout Michigan. MichCon is
subject to the

2



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


accounting requirements and rate regulation of the MPSC with
respect to the distribution and intrastate transportation of
natural gas. Gas Distribution also includes Citizens Gas Fuel
Company (Citizens) a small gas utility serving approximately
15,000 customers in Adrian, Michigan. Citizens rates are
regulated by the Adrian Gas Rate Commission.

PENDING MERGER

MCN and DTE Energy Company (DTE) have signed a definitive
merger agreement, dated October 4, 1999, under which DTE
will acquire all outstanding shares of MCN common stock. The
boards of directors and the shareholders of both companies have
approved the proposed merger. The transaction is subject to
regulatory approvals and other customary merger conditions. The
transaction is expected to close in mid-2000. Refer to
Item 8. Financial Statements and Supplementary Data,
Note 2  Merger Agreement with DTE Energy
Company, page 69 of this report, for additional
information on the proposed merger.

FINANCIAL AND OPERATING INFORMATION

MCN experienced a net loss of $30.8 million, or $.37 per share in
 1999, compared to a net loss of $286.5 million, or $3.63 per
share in 1998. Both years reflect several unusual charges
totaling $98.3 million, or $1.18 per share in 1999 and $389.6
million, or $4.94 per share in 1998. Additionally, 1999 results
include merger costs that reduced earnings by $22.7 million or
$.27 per share, as well as a change in accounting for start-up
costs that reduced earnings by $2.8 million or $.03 per share.
Excluding the unusual charges, merger costs and accounting
change, MCN had 1999 earnings of $93.0 million, or $1.11 per
share compared to 1998 earnings of $103.1 million, or $1.31 per
share. The earnings comparisons reflect the effects of reduced
contributions from Diversified Energys operating segments,
largely due to asset sales, which more than offset the benefits
of MichCons new gas sales program and more favorable
weather.

MCNs results in 1998 before unusual charges decreased $30.1
 million, or $.48 per diluted share from 1997 earnings of $133.2
million, or $1.79 per diluted share. The decline reflects low
energy prices, abnormally warm weather and higher financing
costs, partially offset by reduced operating costs in the Gas
Distribution segment. All per share comparisons were also
affected by an increase in the average number of shares
outstanding due to the issuance of 5,865,000 shares in
April 1999 and 9,775,000 shares in June 1997.

The amount and percentage of revenue contributed by each MCN
segment follows:




Revenue by Segment(in Thousands)*

|                         |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|------------------------ |  | ---- | --------- | ---- |  | ---- | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                         |  |      |           |      |  |     
|                         |  | 1999 |           | 1998 |  | 1997
|                         |  |      |           |      |  |     
|                         |  |      |           |      |  |      |       |   |  |  
|                        
|                        
|                        
|                        
|Pipelines & Processing   |  | $    | 24,792    |      |  |      | 1.0   | % |  | $ | 20,856    |  |  |  | 1.0   | % |  | $ | 6,971     |  |  |  | .3    | %
|                        
|                        
|                        
|                        
|Electric Power           |  |      | 52,207    |      |  |      | 2.1   |   |  |   | 47,131    |  |  |  | 2.3   |   |  |   | 51,804    |  |  |  | 2.4   |  
|                        
|                        
|                        
|                        
|Energy Marketing         |  |      | 1,198,709 |      |  |      | 48.3  |   |  |   | 767,068   |  |  |  | 37.8  |   |  |   | 743,793   |  |  |  | 33.7  |  
|                        
|                        
|                        
|                        
|Exploration & Production |  |      | 43,370    |      |  |      | 1.8   |   |  |   | 150,504   |  |  |  | 7.4   |   |  |   | 144,033   |  |  |  | 6.5   |  
|                        
|                        
|                        
|                        
|Gas Distribution         |  |      | 1,161,990 |      |  |      | 46.8  |   |  |   | 1,045,139 |  |  |  | 51.5  |   |  |   | 1,261,266 |  |  |  | 57.1  |  
|                         |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|MCN Consolidated         |  | $    | 2,481,068 |      |  |      | 100.0 | % |  | $ | 2,030,698 |  |  |  | 100.0 | % |  | $ | 2,207,867 |  |  |  | 100.0 | %
|                         |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  




|  |                                   
|- | ----------------------------------
|* | Excludes intercompany transactions

3



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


MCNs investments in joint ventures contribute significantly
 to earnings. These investments are accounted for under the
equity method and therefore do not impact revenues. For a
discussion of each segments operating and joint venture
income refer to Item 7. Managements Discussion
& Analysis (MD&A), page 30 of this report.
Following are key statistics for each of MCNs business
segments:




|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |         |      | 
|------------------------ | ----------------------------------------- | ------------------------------------ | ----- | ------- | ---- | ---- | ----- | ------- | ---- |  | ----- | ------- | ---- | 
|                         |                                           | 1999                                 |       | 1998    |      | 1997
|                         |                                           |                                      |       |         |      |     
|Operating Statistics*    |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|Pipelines & Processing** |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                        
|                        
|                        
|                        
|                         | Methanol produced (million gallons)       |                                      |       | 57.4    |      |      |       | 60.4    |      |  |       | 60.8    |     
|                        
|                        
|                        
|                        
|                         | Transportation (Bcf)                      |                                      |       | 208.6   |      |      |       | 175.5   |      |  |       | 116.0   |     
|                        
|                        
|                        
|                        
|                         | Gas processed (Bcf):                      |                                      |       |         |      |      |       |         |      |  |       |         |     
|                        
|                        
|                        
|                        
|                         |                                           | Carbon dioxide treatment             |       |         | 51.8 |      |       |         | 48.9 |  |       |         | 42.8 | 
|                        
|                        
|                        
|                        
|                         |                                           | Natural gas liquids removal          |       |         | 73.1 |      |       |         | 45.1 |  |       |         | 21.8 | 
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                         |                                           |                                      | 124.9 |         |      |      | 94.0  |         |      |  | 64.6  |        
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|Electric Power**         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                        
|                        
|                        
|                        
|                         | Electricity sales (thousands of MW hours) |                                      |       | 2,755.8 |      |      |       | 3,805.0 |      |  |       | 1,843.3 |     
|Energy Marketing**       |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                        
|                        
|                        
|                        
|                         | Gas sales (Bcf)                           |                                      |       | 585.7   |      |      |       | 454.7   |      |  |       | 343.7   |     
|                        
|                        
|                        
|                        
|                         | Exchange gas deliveries (Bcf)             |                                      |       | 11.9    |      |      |       | 11.0    |      |  |       | 15.1    |     
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                         |                                           |                                      | 597.6 |         |      |      | 465.7 |         |      |  | 358.8 |        
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|Exploration & Production |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                         | Gas and oil production (Bcf equivalent)   |                                      |       |         |      |      |       |         |      |  |       |         |     
|                        
|                        
|                        
|                        
|                         |                                           | Michigan                             |       |         | 27.3 |      |       |         | 28.0 |  |       |         | 30.2 | 
|                        
|                        
|                        
|                        
|                         |                                           | Appalachia                           |       |         | 22.6 |      |       |         | 19.1 |  |       |         | 10.9 | 
|                        
|                        
|                        
|                        
|                         |                                           | Western and Midcontinent/ Gulf Coast |       |         | 18.9 |      |       |         | 50.8 |  |       |         | 57.2 | 
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                         |                                           |                                      | 68.8  |         |      |      | 97.9  |         |      |  | 98.3  |        
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|Gas Distribution         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                        
|                        
|                        
|                        
|                         | Gas sales (Bcf)                           |                                      |       | 181.8   |      |      |       | 172.2   |      |  |       | 209.1   |     
|                        
|                        
|                        
|                        
|                         | End user transportation (Bcf)             |                                      |       | 152.0   |      |      |       | 140.3   |      |  |       | 145.1   |     
|                        
|                        
|                        
|                        
|                         | Intermediate transportation (Bcf)         |                                      |       | 531.9   |      |      |       | 537.5   |      |  |       | 586.5   |     
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        
|                         |                                           |                                      | 865.7 |         |      |      | 850.0 |         |      |  | 940.7 |        
|                         |                                           |                                      |       |         |      |      |       |         |      |  |       |        




|  |                                   
|- | ----------------------------------
|* | Includes intercompany transactions

|   |                                       
|-- | --------------------------------------
|** | Includes MCNs share of joint ventures

For a detailed discussion of MCNs results of operation and
additional financial information by segment refer to
Item 7. MD&A, page 30 of the report,
and to Item 8. Financial Statements and Supplementary
Data, Note 18  Segment Information, page 97
 of this report.

4



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


DIVERSIFIED ENERGY

PIPELINES & PROCESSING

Strategy and Competitive Environment

Pipelines & Processing intends to focus on opportunities in
the Midwest-to-Northeast region that supply natural gas to meet
growing demand. Much of the growth in the demand for natural gas
in the United States is expected within the Mid-Atlantic and New
England regions. These regions currently lack the pipeline
capacity and low-cost storage necessary to deliver gas volumes to
 meet growing demand. As subsequently discussed, Portland Natural
 Gas Transmission System (PNGTS), Millennium Pipeline
(Millennium) and Vector Pipeline (Vector) are interstate pipeline
 projects that are intended to fill a large portion of that need,
 and are complemented by MCNs significant storage capacity.

Business Developments

Pipelines & Processing anticipates capital investments of
approximately $130 million in 2000. Approximately $120 million
was invested in 1999, which compares with $333 million invested
in 1998 and $172 million in 1997.

Below is a listing of projects MCN has invested in over the past
several years. The facilities are divided into three categories:
i) Regional Facilities,which represent assets inside the
target region that have become part of the new Midstream &
Supply segment and will be integrated with MCNs other gas
functions; ii) Non-Regional Facilities, which include
assets outside the target region that have become part of the new
 Energy Holding segment, and; iii) Coal Fines Plants, four
 of which were sold in 1999.

Regional Facilities:



The Vector project has become a front-runner among competing
projects to provide a new transportation link for up to 1 Bcf/d
of new supply coming into the Chicago area to growing markets in
eastern Canada and in the Midwest and Northeast regions of the
U.S. The project has received authorizations from the Federal
Energy Regulatory Commission (FERC) and Canadas National
Energy Board. Construction of this $500 million project began in
January 2000 and is expected to be completed by
November 2000. Pipelines & Processing holds a 25%
interest in this project and has also contracted for 25% of its
delivery capacity. MichCon will lease a portion of its
transmission system to the project, thereby providing additional
earnings to MCN while reducing Vectors cost and
environmental impact.

Pipelines & Processing has a 10.5% interest in Millennium
which will link up with Vector through the Dawn, Ontario hub and
run through New York. This 442-mile, $685 million pipeline will
carry

5



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


700 MMcf/d to markets on the Atlantic Seaboard. The initially
proposed in-service date of November 2000 has been delayed
pending approval of the project by the FERC.

In Michigan, gas processing capacity was expanded to 202 MMcf/d
in 1999 from 195 MMcf/d in 1998. Pipelines & Processing now
has an average interest of 89% in seven such plants that extract
carbon dioxide (CO2) from Antrim gas production.

Non-Regional Facilities:



Pipelines & Processings other offshore gathering
system, the one-third owned 48-mile Blue Dolphin Pipeline, has
capacity of 180 MMcf equivalent per day (MMcfe/d). During
1999, this venture acquired the 75-mile offshore Black Marlin
Pipeline located near Galveston, Texas that is capable of
transporting up to 160 MMcf/d of gas and 2,000 barrels per day
(Bpd) of liquids. MCNs share of deliveries was 10.4 Bcf
during 1999.

Elsewhere in the Midcontinent/ Gulf Coast region, Pipelines &
 Processing holds a 40% interest in two natural gas gathering
ventures with American Central Gas Companies, Inc. In
July 1997, the Foss Lake Gathering System venture was
created to own and operate a 110-mile low-pressure system in the
Anadarko Basin of western Oklahoma. The system has delivery
capacity of 70 MMcf/d and gas processing capacity of 60 MMcf/d.
MCNs share of deliveries and gas processed was 9.6 Bcf in
1999. In December 1997, the second venture was formed to own
 and operate the East Texas Gathering system. It is located in an
 area of significant drilling activity, providing opportunity for
 rapid expansion. This system primarily consists of 130 miles of
gas gathering lines with delivery capacity of about 200 MMcf/d
and gas processing capacity of 100 MMcf/d. In 1999, MCNs
share of deliveries and gas processed was 57.8 Bcf and 17.9 Bcf,
respectively.

Pipelines & Processing is a 50% partner in Copano Field
Services L.P. In mid-1998, Copano built a 15-mile lateral on its
Upper Gulf Coast system to connect new gas production. Delivery
capacity is 415 MMcf/d, while gas processing capacity is 60
MMcf/d. In 1999, MCNs share of deliveries and gas processed
 was 26.0 Bcf and 7.5 Bcf, respectively. The system now has 867
miles of pipe. Efforts are underway to acquire or build new
pipeline sections to link the various non-contiguous Copano
systems.

Pipelines & Processing has a 35% interest in the Jonah Gas
Gathering System in Wyoming. This system has a capacity of 320
MMcf/d. MCNs share of deliveries was 28.4 Bcf during 1999.

In 1997, Pipelines & Processing created a partnership with
Petro Source Corporation to develop CO2 pipelines and
marketing projects in support of enhanced oil recovery projects.
As its first initiative, the partnership constructed an 82-mile,
100 MMcf/d CO2 pipeline in 1998 that connects four gas
 treating plants to a distribution system servicing enhanced oil
recovery projects in the Permian Basin of west Texas. Pipelines
& Processing has a 33% interest in this Val Verde CO2

6



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


pipeline, which was placed in service during the fourth quarter
of 1998. MCNs share of deliveries was 6.7 Bcf during 1999.

At the DIGP systems onshore terminus in Alabama, the Mobile
 Bay Processing Partnership (MBPP) has constructed a 600
MMcf/d gas processing plant, which was placed in service in the
first quarter of 1999. Effective October 1999, Pipelines
& Processing sold a 14% interest in the venture, bringing its
 ownership to 29%. MCNs share of gas processed was 37.2 Bcf
 during 1999. Related to but separate from this processing plant,
 Pipelines & Processing holds a 4.8% interest in a newly
constructed, 210-mile, 80,000 Bpd liquids pipeline that delivers
natural gas liquids extracted by MBPP and other plants to
southern Louisiana markets.

In 1996, Pipelines & Processing acquired a 25% interest in
Lyondell Methanol Company, L.P., a limited partnership that owns
a 248 million gallon-per-year methanol production plant in Texas.
 Pipelines & Processing supplies a portion of the natural gas
 for the methanol plant. MCNs share of methanol production
in 1999 was 57.4 million gallons.

Pipelines & Processing formed the Crown Asphalt Distribution
joint venture with Crown Energy Corporation in 1998. Pipelines
& Processing has a 50% interest in these asphalt distribution
 operations, which further enhances the value of the MCN/Crown
Energy Asphalt Ridge Joint Venture. The Asphalt Ridge project, in
 which Pipelines & Processing holds a 75% interest, recently
completed construction of a 100,000 ton-per-year high-grade
asphalt manufacturing plant, at a total cost of $18 million. The
plant is experiencing difficulties in producing economical
quantities of asphalt, and MCN is working to resolve the issues.

During 1999, KCI Compression Company L.P. was formed to provide a
 full range of natural gas compression services. MCN owns a 43%
interest in the partnership.

In 1998, MCN advanced approximately $18 million of a
$20 million commitment to a developer of a fertilizer
project in the United Arab Emirates. The advance was structured
as an interest-bearing loan with the possibility of being
converted into an equity investment in the project. The original
advance was due in September 1999. In March 2000, MCN advanced
the remaining $2 million of its original commitment and
restructured the entire $20 million advance plus accrued
interest by taking a promissory note of $22.3 million and
waiving its rights to convert the advance to equity. The note is
secured by the projects assets and is due in September
2000.

The Cardinal States Pipeline, which gathers and transports
coalbed methane in Appalachia, constructed a second 30-mile
pipeline in 1998, doubling delivery capacity to 225 MMcf/d
to handle increasing production in the region. MCNs share
of deliveries was 17.9 Bcf during 1999. MCN sold its 50%
interest in this system in early 2000.

Coal Fines Plants:



7



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


would challenge the projects eligibility for tax credits.
In addition, there was uncertainty as to whether MCN could
utilize or sell the credits. These factors led to MCNs
decision in 1998 to record an impairment loss, equal to the
carrying value of the plants, reflecting the likely inability to
recover such costs.

MCN sought to maximize the value of its investment in the coal
fines project, and in May 1999 filed a request with the IRS
seeking a factual determination that its coal fines plants were
in service on June 30, 1998. In September 1999, MCN received
 in-service determination letters from the IRS with
respect to the coal plants. In the determination letters, the IRS
 ruled that four of the plants were in service by the
June 30, 1998 deadline in order to qualify for synthetic
fuel tax credits. The IRS also ruled that the two other plants
did not meet the in-service requirements. MCN continues to
believe these two plants also meet the requirements and appealed
the unfavorable rulings.

In December 1999, MCN sold the four coal fines plants that
received in-service determination letters to DTE in
an arms-length transaction that is independent of the pending
merger. The sales price will depend on total production of the
four plants. DTE made an initial payment of $45 million, and this
 payment will be adjusted up to $152 million or down to zero
based on the results of a 36-month production test period.

ELECTRIC POWER

Strategy and Competitive Environment

The Electric Power unit operates through several joint ventures
to pursue power generation-related opportunities in the
Midwest-to-Northeast region. Power generation projects offer the
potential for multiple sources of income, such as long-term gas
sales and transportation services, as well as return on the
investment in the facility itself.

The majority of new power generation facilities throughout North
America are expected to be gas-fired because of competitive and
environmental considerations, as well as the speed with which
such facilities can be brought on line. Demand for new gas-fired
generation facilities in the Midwest and along the East Coast has
 significantly increased. In addition, U.S. electricity
consumption has been growing at a 2.2% annual rate and is
estimated by government and industry sources to grow more than
30% by 2015.

Business Developments

Electric Power anticipates capital investments of approximately
$40 million in 2000. Approximately $130 million was invested in
1999, compared to $90 million in 1998 and $243 million in 1997.

Below is a listing of projects MCN has invested in over the past
several years. The facilities are divided into three categories:
i)Facilities sold or to be sold, which include
those being disposed of as part of the merger agreement with DTE;
 ii)Regional Facilities, which represent assets
inside the target region that have become part of the new Power
segment; and iii)Non-Regional Facilities, which are
assets outside the target region that have become part of the
Energy Holdings segment.

8



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


Facilities sold or to be sold:



As part of the merger agreement with DTE, MCN has agreed to sell
its interests in five power projects, four of which are
Qualifying Facilities as defined by the Public
Utility Regulatory Policies Act of 1978, as amended. This act
limits the interest in a project that can be owned by electric
companies while maintaining the projects status as a
Qualifying Facility. In the first quarter of 2000,
MCN sold its interests in the Midland Cogeneration Venture (MCV)
and the Carson Cogeneration facility. Under the terms of the MCV
sales agreement, if MCNs merger with DTE is not completed,
MCN may reacquire its 23% interest in the project. MCN has also
reached an agreement to sell its interest in the Michigan Power
Project and the Ada Cogeneration facility. These sales are
expected to be completed in the second quarter of 2000.
Additionally, MCN has reached an agreement in principle for the
sale of its interest in the Cobisa-Person facility that is
currently under construction. The sale is subject to FERC
approval. Refer to Item 8. Financial Statements and
Supplementary Data, Note 2  Merger Agreement with
 DTE Energy Company, page 69 of the report, for
additional information on the pending merger. Following is a
discussion related to each of these facilities.

Electric Power acquired an initial 18% general partnership
interest in MCV in 1997 and an additional 5% general partnership
interest in 1998. MCV is a partnership that leases and operates a
 1,370 MW cogeneration facility in Midland, Michigan.

In 1998, Electric Power acquired a 47 3/4% interest,
subsequently reduced to a 33 1/3% interest, in a 42 MW
gas-fired cogeneration plant in Carson, California.

In 1994, Electric Power acquired a 50% interest in the Michigan
Power Project, a 123 MW cogeneration plant in Ludington,
Michigan.

In 1990, Electric Power acquired an interest in Ada Cogeneration,
 which owns and operates a 30 MW natural gas-fueled
cogeneration plant in western Michigan. Electric Power holds a
50% interest in this facility.

During 1998, Electric Power acquired a 95% interest in the
Cobisa-Person Power project, a venture created to build, own and
operate a 140 MW power plant in Albuquerque, New Mexico.

Regional Facilities:



9



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


Non-Regional Facilities:



In 1997, Electric Power acquired an approximate 65% interest in
Bhote Koshi Power Company, a partnership that is constructing a
36 MW hydroelectric power plant in Nepal. Construction of
the plant began in early 1997 and is scheduled to be completed in
 late 2000.

ENERGY MARKETING

Strategy and Competitive Environment

Energy Marketing plans to grow primarily as a provider of
high-value energy supply and management services to commercial
and industrial customers and other large-volume users located in
the Midwest and Eastern regions of the United States and eastern
Canada. These services generally entail the bundling of energy
supplies, transportation and often storage capacity to provide
energy to customers in a convenient and efficient manner. Bundled
 services are in greater demand during the winter months, when
interstate pipeline capacity in certain areas of the Northeast
and Midwest is constrained. Additionally, Energy Marketing sells
gas to other gas marketers and brokerage companies.

Energy Marketing is able to better meet its customers
demands through access to storage fields and other physical
assets owned by affiliates. When marketing bundled gas services,
access to storage capacity can provide a competitive advantage by
 allowing for a very reliable and flexible service while keeping
operating costs low.

Energy Marketing competes against numerous marketing companies.
Given the level of energy consumed in the region, the persistent
need for additional electric supply, and the cost and reliability
 challenges that customers face, developing and marketing gas
supply to power generators is expected to be a key area of
growth.

Business Developments

MCN has interests in two marketing joint ventures and has
contract rights for interstate transportation capacity and for
long-term storage. The discussion of each is divided into two
categories: i)Regional Activity, which includes
investments, transportation and storage contracts that have
become part of the new Energy Marketing and Midstream &
Supply segments and; ii)Non-Regional Activity, which
 represents an investment outside the target region.

Under MCNs revised strategy, the gas supply and storage
functions, as well as gas sales to marketers and brokers,
previously performed by Energy Marketing are being performed by
the new Midstream & Supply segment.

Regional Activity:



10



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


Oil Company, Inc., formed for the purpose of selling natural gas,
 fuel oil and propane to target markets within Wisconsin.

Assisting Energy Marketings efforts is strategically
selected pipeline capacity that is used to deliver gas to its
markets. Energy Marketing has firm transportation service with
various pipeline systems totaling over 475 MMcf/d, which is
supplemented by interruptible service as needed. However, some of
 the contracts have high-costs and the related pipeline capacity
is underutilized. Energy Marketing is continuing its efforts to
optimize the utilization of its capacity under these contracts to
 maximize value. Among other interstate pipelines, Energy
Marketing holds significant capacity in PNGTS, as well as the
proposed Vector and Millennium pipelines. MCNs Pipelines
& Processing segment owns an interest in each of these
interstate pipelines.

The Washington 10 storage field is strategically located in
southeast Michigan, and has significantly increased the amount of
 gas storage capacity available to Energy Marketing. The project
has converted a depleted gas reservoir to a 42 Bcf storage
facility. Initial gas injection occurred in the spring of 1999,
and the facility reached completion in July 1999, in time
for the 1999-2000 winter heating season.

Energy Marketing has a 50% interest in the 10 Bcf Washington 28
storage field, located northeast of Detroit in Macomb County. In
December 1997, Energy Marketing sold its 25% share of the 46
 Bcf Blue Lake gas storage project located in northern Michigan.
MichCon maintains its 25% interest in the Blue Lake venture.

In total, with the addition of Washington 10, Energy Marketing
has rights to 71 Bcf of market-area storage capacity in
2000. Energy Marketing will use this storage in conjunction with
its firm and interruptible transportation capacity on various
pipelines to continue increasing its marketing presence in the
Midwest and Northeast, as well as in eastern Canada.

Non-Regional Activity:



Other

Approximately 50% of Energy Marketings natural gas supply
in 1999 originated in the Midwest, 30% in the Midcontinent and
the remaining 20% in the Northeast U.S. and Canada.

EXPLORATION & PRODUCTION

Strategy and Competitive Environment

MCNs strategy for the E&P business is to aggressively
manage the Michigan oil and gas producing assets and to optimize
returns. MCN has accumulated one of the industrys largest
Antrim gas reserve bases, accounting for approximately 20% of the
 total Michigan Antrim gas production. During 1999, MCN
participated in the drilling of 35 wells (27 net) in the
Antrim formation, bringing the total drilled to 1,377 wells
(1,053 net). Even though the potential natural gas recovery from
the average Antrim well is less than the recovery from wells
drilled in other formations, wells

11



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


drilled in the Antrim shale formations have a high success rate
and low drilling costs, and are therefore considered relatively
low risk. E&P expects to sell its 2000 gas production to the
Energy Marketing, Power and Gas Distribution segments.

Business Developments

E&P had capital investments of approximately $100 million in
1999, $200 million in 1998 and $375 million in 1997 and
anticipates spending approximately $30 million in 2000.

Below is a listing of properties MCN has invested in over the
past several years. The facilities are divided into two
categories: i)Regional Properties, which represent
properties inside the target region that have become part of the
new Midstream & Supply segment; and ii)Sold
Properties, which are properties outside the target region.
E&P sold these non-regional properties in 1999.

MCN will maximize the profitability of its properties in Michigan
 by efficiently integrating production with the Pipelines &
Processing and Energy Marketing segments.

Regional Properties:



Sold Properties:



Risk Management Strategy

MCN manages commodity price risk by utilizing futures, options
and swap contracts to more fully balance its portfolio of gas and
 oil supply and sales agreements. MCNs Energy Marketing
business coordinates all of MCNs hedging activities to
ensure compliance with risk management policies that are
periodically reviewed by MCNs Board of Directors. In late
1998, MCN began entering into offsetting positions for existing
hedges of gas and oil production from properties that were sold
in 1999.

GAS DISTRIBUTION

Gas Distribution serves approximately 1.2 million customers in
the Detroit, Grand Rapids, Ann Arbor, Traverse City, Muskegon and
 Adrian metropolitan areas and in various other communities
throughout Michigan. The following services are provided by Gas
Distribution:



|  |                                                                                                                                                                                                                                                                       
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Gas Sales  Includes the sale and delivery of
	natural gas primarily to residential and small-volume commercial
	and industrial customers.                                                                                                                            
| 
| | End User Transportation  A gas delivery service
	 provided primarily to large-volume commercial and industrial
	customers. Additionally, the service is provided to residential
	customers, and small-volume commercial and industrial customers
	who have elected to

12



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)




|  |                                                                                                                                                                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|  | participate in MichCons experimental three-year customer
	choice program that began in April 1999. End user transportation
	customers purchase natural gas directly from producers or
	brokerage companies and utilize MichCons pipeline network
	to transport the gas to their facilities or homes.                                                                                                    
| 
| | Intermediate Transportation  A gas delivery
	service provided to producers, brokers and other gas companies
	that own the natural gas, but are not the ultimate consumers.
	Intermediate transportation customers utilize Gas
	Distributions gathering and high pressure transmission
	system to transport the gas to storage fields, processing plants,
	 pipeline interconnections or other locations.
| 
| | Other  Includes revenues from providing
	appliance maintenance, facility development, meter reading,
	heating, ventilation and air conditioning, and other
	energy-related services.                                                                                                                                                                                                                     

The amount and percentage of revenue contributed from each of
these services follows:




Revenue by Service(in Thousands)

|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|--------------------------- |  | ---- | --------- | ---- |  | ---- | ----- | - |  | - | --------- |  |  |  | ----- | - |  | - | --------- |  |  |  | ----- | -
|                            |  |      |           |      |  |     
|                            |  | 1999 |           | 1998 |  | 1997
|                            |  |      |           |      |  |     
|                            |  |      |           |      |  |      |       |   |  |   |           | 
|                           
|                           
|                           
|                           
|Gas Sales                   |  | $    | 924,580   |      |  |      | 79.0  | % |  | $ | 838,876   |  |  |  | 79.8  | % |  | $ | 1,080,104 |  |  |  | 85.0  | %
|                           
|                           
|                           
|                           
|End User Transportation     |  |      | 103,879   |      |  |      | 8.9   |   |  |   | 82,275    |  |  |  | 7.8   |   |  |   | 84,749    |  |  |  | 6.7   |  
|                           
|                           
|                           
|                           
|Intermediate Transportation |  |      | 57,783    |      |  |      | 4.9   |   |  |   | 63,218    |  |  |  | 6.0   |   |  |   | 55,221    |  |  |  | 4.3   |  
|                           
|                           
|                           
|                           
|Other                       |  |      | 84,358    |      |  |      | 7.2   |   |  |   | 67,405    |  |  |  | 6.4   |   |  |   | 51,212    |  |  |  | 4.0   |  
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|                            |  |      | 1,170,600 |      |  |      | 100.0 | % |  |   | 1,051,774 |  |  |  | 100.0 | % |  |   | 1,271,286 |  |  |  | 100.0 | %
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|Less: Affiliated Sales      |  |      | 8,610     |      |  |      |       |   |  |   | 6,635     |  |  |  |       |   |  |   | 10,020    |  |  |  |       |  
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  
|                            |  | $    | 1,161,990 |      |  |      |       |   |  | $ | 1,045,139 |  |  |  |       |   |  | $ | 1,261,266 |  |  |  |       |  
|                            |  |      |           |      |  |      |       |   |  |   |           |  |  |  |       |   |  |   |           |  |  |  |       |  




Gas Distribution expects to achieve modest revenue growth through
 initiatives to expand its gas markets, its residential,
commercial and industrial customer base, as well as by providing
new energy-related services that capitalize on its expertise,
capabilities and efficient systems.

GAS SALES

Strategy and Competitive Environment

Competition in the gas sales market comes primarily from
(1) other natural gas providers, and (2) alternative
fuels such as electricity, propane and, to a lesser degree, oil
and wood.

Other natural gas providers  MichCon has
implemented its Regulatory Reform Plan, which includes a
comprehensive experimental three-year customer choice program.
The customer choice program began in April 1999, and
approximately 70,000 customers chose to purchase natural gas from
 suppliers other than MichCon. Year two and year three of the
program begin April 1 of 2000 and 2001, respectively. The
number of customers allowed to participate in the program is
limited to 150,000 in 2000 and 225,000 in 2001. There is also a
volume limitation on commercial and industrial participants of 20
 Bcf in 2000 and 30 Bcf in 2001.

13



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


The State of Michigan is continuing its initiatives designed to
give all of Michigans natural gas customers added choices
and the opportunity to benefit from lower gas costs resulting
from competition. Natural gas choice legislation is before the
Michigan legislature, and if approved, would: (1) give any
qualified gas supplier the opportunity to compete; (2) phase
 in gas choice for all Michigan customers over three to five
years; and (3) replace the regulatory gas commodity pricing
process with one based on market prices which allow all customers
 to get the benefits of market-based pricing whether they elect
to stay with their utility or choose another gas commodity
supplier. Natural gas choice legislation could become effective
prior to the end of MichCons three-year customer choice
program that ends in March 2002, and therefore accelerate the
transition to a competitive natural gas market.

Alternative fuels  Natural gas continues to be
the preferred fuel for Michigan residences and businesses. Nearly
 every residential and commercial developer in MichCons
service territories selects natural gas in new construction
because of the convenience, cleanliness and price advantage of
natural gas compared to propane, fuel oil and other alternative
fuels.

Gas Distribution continues to take steps to become the preferred
provider of natural gas and high-value energy services within
Michigan in order to achieve competitive financial results. To
accomplish this, Gas Distribution is positioning itself to
respond to changes in regulation and increased competition by
reducing its cost of operations, maintaining a safe and reliable
system for customers, and focusing on meeting the needs of the
marketplace.

Business Developments

Gas Distribution was able to achieve record earnings during 1999,
 primarily as a result of margins generated under MichCons
new three-year gas sales program. As discussed in detail in the
Regulatory Reform Plan section on page 18 of
this report, the gas sales program allows MichCon to profit from
its ability to purchase gas at less than $2.95 per Mcf. Gas sales
 margins are expected to be lower in future years as
MichCons fixed-price supplies in 2000 and 2001 are at
prices higher than those paid in 1999. Additionally, gas sales
margins will be impacted if additional customers choose to
purchase their gas from other suppliers.

The gas sales service in 1999 represented approximately 21% of
total deliveries, 79% of total revenues and 65% of total gross
margins.

END USER TRANSPORTATION

Strategy and Competitive Environment

The primary focus of competition in this market is cost and
reliability. Some large commercial and industrial customers have
the capacity to switch to alternative fuel sources such as coal,
electricity, oil and steam. If these customers were to choose an
alternative fuel source, they would not have a need for Gas
Distributions end user transportation service. In addition,
 some of these customers could bypass Gas Distributions
pipeline system and obtain gas directly from an interstate
pipeline company. However, cost differentials must be sufficient
to offset the costs, risks and loss of service flexibility
associated with fuel switching or bypass. Since 1988, only one of
 Gas Distributions industrial customers has bypassed its
distribution system. Gas Distribution competes against

14



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


alternative fuel sources by providing competitive pricing and
reliable supply through the use of MichCons extensive
storage capacity.

Business Developments

As of December 1999, MichCon had end user transportation
agreements with customers representing annual volumes of 159.4
Bcf. Approximately 69% of these volumes are under contracts that
extend to 2001 or beyond and include the majority of the large,
and most price-sensitive customers. Contracts for the remaining
volumes are typically one-year contracts that expire at various
times during 2000 and relate to a large number of low-volume
users with relatively low price sensitivity.

Gas Distribution continues to be successful in converting
customers facilities to natural gas from alternative fuels
and in retaining those customers after conversion. Also, it has
not experienced any significant fuel switching by its customers
in recent years. In addition, almost all significant customers
who could bypass Gas Distributions systems are under
long-term transportation contracts. In 1999, approximately 18 Bcf
 of Gas Distributions end user transportation deliveries
were to customers who chose natural gas over coal.

MichCon has implemented its experimental three-year customer
choice program, and approximately 70,000 customers have chosen to
 purchase natural gas from suppliers other than MichCon in 1999.
The number of customers allowed to participate in the program is
limited to 150,000 in 2000 and 225,000 in 2001. MichCon will
continue to transport and deliver the gas to the customers
premises or homes. Accordingly, these customers will be reflected
 as end user transportation customers rather than gas sales
customers.

In 1999, end user transportation services accounted for
approximately 18% of total gas deliveries, 9% of total revenues
and 16% of total gross margins.

INTERMEDIATE TRANSPORTATION

Strategy and Competitive Environment

Gas Distributions extensive transmission pipeline system
has enabled it to generate markets for transportation services
for Michigan gas producers, marketers, distribution companies and
 other pipeline companies that range from 500 to 600 Bcf
annually. Gas Distribution operates in a pivotal geographic
location with links to major interstate pipelines that reach
markets elsewhere in the Midwest, the eastern United States and
eastern Canada. Michigan Antrim gas production has increased
significantly over the past several years, resulting in a growing
 demand by gas producers and brokers for intermediate
transportation services.

Gas Distribution is in an excellent position to increase revenues
 by facilitating the transportation of new supplies of western
Canadian gas from Chicago to growing markets in eastern Canada
and the Northeast United States. In December 1997, MichCon
entered into a long-term facility lease of its
Milford-to-Belle-River Pipeline to the Vector Pipeline
Partnership. A MCN Pipelines & Processing subsidiary has a
25% interest in the $500 million Vector pipeline project. Gas
Distribution is

15



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


pursuing additional opportunities for transportation services
that would further maximize the use of its transmission
infrastructure.

Business Developments

In 1997, Gas Distribution expanded the transportation capacity of
 its northern Michigan gathering system and further enhanced this
 gathering system by purchasing the 44-mile Thunder Bay pipeline.
 Additionally, Gas Distribution placed into service a $91
million, 59-mile loop of its existing Milford-to-Belle-River
Pipeline. This loop has improved the overall reliability and
efficiency of Gas Distributions gas storage and
transmission system by mitigating the risk associated with the
disruption of the existing pipeline or other facilities used to
supply gas to Gas Distributions customers. The pipeline
expansions and acquisitions were needed to meet increased demand
for intermediate transportation services and to provide
significant off-system transportation opportunities.

In 1999, intermediate transportation services accounted for
approximately 61% of total gas deliveries, 5% of total revenues
and 9% of total gross margins. While intermediate transportation
volumes are a significant part of total deliveries, profit
margins on this service are considerably less than margins on gas
 sales and end user transportation services.

Effect of Weather

Gas Distributions gas sales, end user transportation and
intermediate transportation volumes, revenues and net income are
impacted by weather. Given the seasonal nature of the business,
revenues and net income are concentrated in the first and fourth
quarters of the calendar year. By the end of the first quarter,
the heating season is largely over, and Gas Distribution
typically incurs substantially reduced revenues and earnings in
the second quarter and losses in the third quarter. The seasonal
nature of Gas Distributions operations has become more
pronounced as a result of MichCons new gas sales program.
Refer to Item 7. MD&A, page 30 of this
report for additional discussion relating to the effect of
weather.

Gas Supply

As a result of MCNs new strategic direction, the Midstream
& Supply segment coordinates and integrates all of MCNs
 gas-supply functions. This function includes purchasing the gas
commodity itself and aggregating the transportation and storage
capacity required to deliver the gas for the Gas Distribution
segment as well as MCNs other segments. Accordingly,
beginning in 2000 Midstream & Supply will manage all of
Gas Distributions supply agreements, and Gas Distribution
will acquire its gas supply from Midstream & Supply.

Prior to 2000, Gas Distribution obtained its natural gas supply
from various sources in different geographic areas (the Gulf
Coast, the Midcontinent, Canada and Michigan) under agreements
that vary in both pricing and terms. As a result of
MichCons Regulatory Reform Plan, MichCon entered into new
base supply contracts with its suppliers in 1998, ensuring price
stability and supply reliability. Gas Distributions
geographic diversity of supply, coupled with its 124 Bcf of
storage capacity, ensures it will be able to meet the
requirements of its existing and future customers with

16



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


reliable supplies of natural gas at a known cost. MichCon
benefits from the Regulatory Reform Plan by being able to profit
on the sale of gas as a result of: (1) the suspension of the
 Gas Cost Recovery (GCR) mechanism; and (2) its ability to
purchase gas at less than $2.95 per Mcf, which is the fixed gas
commodity component of its sales rate. MichCon has taken
advantage of this opportunity and secured a substantial portion
of its expected warmer-than-normal supply requirements in 2000
and 2001 at prices that help ensure continued profit
contributions. Refer to Regulatory, Rate and Governmental
Matters that follows for a discussion regarding the
Regulatory Reform Plan.

Following is a listing of Gas Distributions sources of gas
supply:




Gas Supply (Bcf)

|                                   |                      |      |       |      |  |      |       |      |  |  |       |      | 
|---------------------------------- | -------------------- | ---- | ----- | ---- |  | ---- | ----- | ---- |  |  | ----- | ---- | 
|                                   |                      | 1999 |       | 1998 |  | 1997
|                                   |                      |      |       |      |  |     
|Long-Term:                         |                      |      |       |      |  |      |       |      |  |  |       |     
|                                  
|                                  
|                                  
|                                  
|                                   | Michigan suppliers   |      |       | 99.4 |  |      |       | 94.4 |  |  |       | 97.7 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Interstate suppliers |      |       | 63.9 |  |      |       | 17.6 |  |  |       | 16.1 | 
|                                  
|                                  
|                                  
|                                  
|                                   | Canadian suppliers   |      |       | 29.9 |  |      |       | 25.9 |  |  |       | 28.2 | 
|                                  
|                                  
|                                  
|                                  
|Spot Market                        |                      |      | 4.7   |      |  |      | 29.8  |      |  |  | 60.5  |     
|                                  
|                                  
|                                  
|                                  
|Exchange Gas Receipts (Deliveries) |                      |      | (7.5  | )    |  |      | 11.2  |      |  |  | (2.3  | )   
|                                   |                      |      |       |      |  |      |       |      |  |  |       |     
|                                   |                      |      | 190.4 |      |  |      | 178.9 |      |  |  | 200.2 |     
|                                   |                      |      |       |      |  |      |       |      |  |  |       |     




MichCon has long-term firm transportation agreements expiring on
various dates through 2011 with ANR Pipeline Company (ANR),
Panhandle Eastern Pipeline Company (Panhandle), Viking Gas
Transmission Company (Viking) and Great Lakes Gas Transmission
Limited Partnership (Great Lakes). ANR was obligated to transport
 for MichCon up to 375 MMcf/d of supply through October
1999. Effective in November 1999, MichCons capacity with
ANR was reduced to 285 MMcf/d. The capacity reduction
results in roughly $13 million in annual cost savings. ANR
capacity delivers 117.5 MMcf/d of supply sourced in the Gulf
 Coast, 117.5 MMcf/d sourced in the Midcontinent and
50 MMcf/d from Canada. Viking transports 50 MMcf/d of
Canadian supply to the ANR system for delivery to MichCon, and
Panhandle transports 2 MMcf/d of Gulf Coast supply from the
ANR system for delivery to MichCon. Additional Canadian supplies
of 30 MMcf/d are delivered through firm transport agreements
 with Great Lakes.

MichCon has supply contracts with independent Michigan producers,
 which expire on various dates through 2007. Many of these
contracts originally tied prices to spot market indices coupled
with transport rates. As a result of an MPSC Order and
individually negotiated settlements, MichCon has successfully
amended a number of these contracts that were previously at
above-market prices to a more competitive level.

Citizens is served by Panhandle and ANR. During 1999, nearly all
of Citizens gas purchases were from the Energy Marketing
segment.

At December 31, 1999, MichCon owned and operated four
natural gas storage fields in Michigan with a working storage
capacity of approximately 124 Bcf. These facilities play an
important role in providing reliable and cost-effective service.
MichCon uses its storage capacity to supplement its

17



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


supply during the winter months, replacing the gas in April
through October when demand and prices are generally at their
lowest levels. The use of storage capacity also allows MichCon to
 lower its peak-day entitlement, thereby reducing interstate
pipeline charges. MichCons gas distribution system has a
maximum daily send out capability of 3.0 Bcf, with the
capacity to supply nearly 70% from underground storage.

Regulatory, Rate and Governmental Matters

MichCon is subject to the jurisdiction of the MPSC as to various
phases of its operations, including gas sales and transportation
rates, service and accounting. Citizens rates are set by
the Adrian Gas Rate Commission, a municipal commission. Other
various phases of Citizens operations are subject to the
jurisdiction of the MPSC. Both MichCon and Citizens are subject
to the requirements of other regulatory agencies with respect to
safety, the environment and health.

Regulatory Reform Plan:In April 1998, the
MPSC approved MichCons Regulatory Reform Plan. The plan
includes a comprehensive experimental three-year customer choice
program open to all of MichCons 1.2 million residential and
 commercial customers, subject to annual caps on the level of
participation. The customer choice program began April 1,
1999, with approximately 70,000 customers choosing to purchase
natural gas from suppliers other than MichCon. Year two and year
three of the program begin April 1 of 2000 and 2001,
respectively. The number of customers allowed to participate in
the program is limited to 150,000 in 2000 and 225,000 in 2001.
There is also a volume limitation on commercial and industrial
participants of 20 Bcf in 2000 and 30 Bcf in 2001. MichCon will
continue to transport and deliver the gas to the customers
premises at prices that generate favorable margins.

The Regulatory Reform Plan also suspended the GCR mechanism for
customers who continue to purchase gas from MichCon, and fixed
the gas price component of MichCons sales rates at $2.95
per Mcf for the three-year period that began in
January 1999. The suspension of the GCR mechanism allows
MichCon to profit from its ability to purchase gas at less than
$2.95 per Mcf. Prior to 1999, MichCon did not generate earnings
on the gas commodity portion of its operations. As part of its
gas acquisition strategy, MichCon has entered into fixed-price
contracts at costs below $2.95 per Mcf for a substantial portion
of its expected gas supply requirements through 2001. This
strategy has produced favorable margins in 1999 and is likely to
continue producing favorable margins through 2001. The level of
margins generated from selling gas will be affected by the costs
of gas supply and the number of customers who ultimately choose
to purchase gas from suppliers other than MichCon under the
three-year customer choice program.

The Plan also encompasses an income sharing mechanism that allows
 customers to share in profits when actual returns on equity from
 utility operations exceed predetermined thresholds. Although the
 Plan increases MichCons risk associated with generating
margins that cover its gas costs, management believes this Plan
will have a favorable impact on future earnings.

Proposed Legislation:The State of Michigan is
continuing its initiatives designed to give all of
Michigans natural gas customers added choices and the
opportunity to benefit from lower gas costs resulting from
competition. Natural gas choice legislation is before the
Michigan legislature and, if approved, would: (1) give any
qualified gas supplier the opportunity to compete; (2) phase
 in gas

18



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


choice for all Michigan customers over three to five years; and
(3) replace the regulatory gas commodity pricing process
with one based on market prices that allows all customers to get
the benefits of market-based pricing whether they elect to stay
with their utility or choose another gas commodity supplier.
Natural gas choice legislation could become effective prior to
the end of MichCons three-year customer choice program that
 ends in March 2002, and therefore accelerate the transition
 to a competitive natural gas market.

General Rate Proceedings:MichCon received MPSC
authorization to defer manufactured gas plant
(MGP) investigation and remediation costs in excess of the
$11.7 million previously reserved. In 1999, MichCon depleted the
initial reserve. Costs incurred in excess of the initial reserve
are being deferred and amortized over a 10-year period beginning
in the year subsequent to the year environmental investigation
and remediation costs are paid. The recovery of any investigation
 and remediation costs incurred will be reviewed in a future rate
 case.

MichCon filed an application with the MPSC in 1996 requesting
authority to decrease depreciation rates from an average rate of
4.1% to 3.5%. In December 1997, the MPSC issued an order
approving a reduction in annual depreciation costs by more than
$16 million. The Michigan Attorney General appealed the
depreciation order. In June 1999, MichCon received a
favorable ruling to this appeal by the Michigan Court of Appeals,
 which affirmed the MPSC order approving the lower depreciation
rates without a corresponding gas rate reduction.

In 1994, Citizens entered into a rate agreement with the
municipal commission that sets Citizens rates. Under the
terms of this agreement, which went into effect in
January 1995, Citizens received a 3% rate increase, and its
rates were frozen for five years. The rate agreement, which
expired in January 2000, has been temporarily extended until
 a new agreement can be finalized. The rate agreement provides
Citizens customers with known prices and MCN with an
opportunity to control costs and continue to earn a reasonable
rate of return.

Gas Cost Recovery:Prior to 1999, the GCR process
allowed MichCon to recover its cost of gas sold if the MPSC
determined that such costs were reasonable and prudent. As
previously discussed, beginning in January 1999,
MichCons Regulatory Reform Plan suspended the GCR mechanism
 and fixed the gas commodity component of MichCons sales
rate at $2.95 per Mcf for three years.

The GCR process included an annual Gas Supply and Cost Review, in
 which the MPSC approved maximum monthly GCR factors. A
subsequent annual GCR reconciliation proceeding provided a review
 of gas costs incurred during the year, determined whether
approved gas costs had been overcollected or undercollected and,
as a result, whether a refund or surcharge, including interest,
was required to be returned to or collected from GCR customers.
In February 1999, MichCon filed its final GCR reconciliation
 case covering gas costs incurred during 1998, which indicates an
 overrecovery of $18 million, including interest. Management
believes that the 1998 gas costs were reasonable and prudent and
that the MPSC should approve the gas costs incurred. However,
management cannot predict the outcome of this proceeding. During
the first quarter of 1999, MichCon refunded the overrecovery to
customers as a reduction in gas sales rates.

FERC Rate Matters:In February 1998, the FERC
approved a settlement agreement in an ANR rate case entitling
MichCon to refunds totaling $9.4 million. MichCon received $5.5
million of this refund in April 1998 relating to certain
transportation services provided by ANR to MichCon. In

19



---



##### Table of Contents



ITEM 1. BUSINESS(CONTINUED)


June 1998, MichCon received the remaining refund, which was
reflected as a reduction to MichCons cost of gas.

Other Rate Matters:In March 2000, several
shippers on MichCons northern Michigan gathering system
filed a complaint with the MPSC requesting that the commission
issue an order reducing the rate charged for Antrim gas
transportation services from 9 cents to approximately 3.9 to
 3.1 cents per Mcf. The complaint also requests refunds of
approximately $21 million for prior periods during which that
rate has been in effect. Management believes that the commission
has no legal authority to order refunds associated with prior
periods. The shippers allege that without the reduced
transportation rate, MichCon would overcollect approximately
$28.5 million over the next six years. While any complaint about
rates could result in a commission ordered reduction in rates,
managements preliminary assessment of the complaint is that
 it is without merit.

Energy Assistance Programs:Energy assistance
programs funded by the federal government and the State of
Michigan, including the Home Heating Credit for low-income
customers and the Family Independence Agencys State
Emergency Relief Program, remain critical to MichCons
ability to control its uncollectible gas account expenses.

The State of Michigan provides assistance in the form of Michigan
 Home Heating Credits that are funded almost exclusively by the
Federal Low-Income Home Energy Assistance Program (LIHEAP).
Congress approved funding for both the 1998 and 1999 fiscal years
 at $1.1 billion, compared to funding of $1.0 billion for the
1997 fiscal year. The State of Michigans share of LIHEAP
funds was increased from $54 million in fiscal year 1998 to $59
million in 1999. Gas Distribution received $12.6 million of these
 funds in 1999, $.8 million less than in 1998. Home Heating
Credits assisted 69,000 Gas Distribution customers in 1999,
compared to 73,000 in 1998. During 1999, President Clinton signed
 an appropriations package that funds LIHEAP at $1.1 billion for
fiscal year ending in September 2000.

Environmental Matters

A discussion of environmental matters is included in
Item 7, MD&A  Environmental
Matters, page 48 of this report, and in
Item 8.  Financial Statements and Supplementary
Data, Note 13  Commitments and
Contingencies under the heading Environmental
Matters, page 86 of this report.

Franchises

MichCon operates in more than 530 cities, villages and townships
under franchises or permits that typically are revocable at will
and have a 30-year maximum duration. In 1993, MichCon began a
structured process to renew or re-establish formal franchises in
233 municipalities that had expired. During the 1994 to 1999
period, an additional 193 franchises expired. To date, 399
franchises have been renewed, including 9 renewed in 1998,
accounting for gas sales volumes of approximately 115 MMcf
annually, and 8 renewed in 1999 representing 161 MMcf annually.
Additionally, one new franchise was acquired in 1998. There were
no franchises lost during 1998 or 1999.

20



---



##### Table of Contents



ITEM 1. BUSINESS(CONCLUDED)


As for the 27 franchises that are currently expired,
MichCons gas distribution systems are rightfully occupying
the streets with the consent or acquiescence of the
municipalities. While MichCon could be ordered to remove its
property by any municipality in which its franchise has expired,
it could lose ownership only by its consent and the payment of an
 agreed-upon price, or by condemnation and the payment of the
fair value of such property. Should any of these municipalities
seek to terminate MichCons operations therein and
substitute another gas utility operation, publicly or privately
owned, the municipality must either (1) acquire and operate
MichCons system, (2) construct a new system or
(3) grant a franchise to another privately owned utility to
construct or acquire its own distribution system.

Citizens operates in cities and townships in and around Adrian,
Michigan under franchises or permits that are revocable, have a
30-year maximum duration, and provide for municipal rate setting.
 In November 1995, the residents of Adrian voted favorably
on granting a 30-year renewal franchise to Citizens. There were
three franchise renewals during 1998. No franchises were renewed
in 1999.

Other

Collective Bargaining Agreements:Slightly less than half
of MichCons labor force is covered by five collective
bargaining agreements. In June 1998, MichCon successfully
negotiated and signed three 3-year collective bargaining
agreements. The remaining two agreements will expire in
December 2000.

Other:MCN is involved in several residential and
commercial community development partnerships.

MCNIC Gas Storage Company, a 100%-owned subsidiary of MCNEE,
holds a 50% limited partnership interest in The Orchards Golf
Limited Partnership. The Orchards golf course is above the
Washington 28 storage field, located north of Detroit. The
partnership was formed in 1991 and developed approximately 450
acres of land in Washington Township, Michigan. The acreage
consists of an 18-hole championship golf course on approximately
200 acres and residential development of the remaining 250 acres.

MichCon Development Company, a 100%-owned subsidiary of MichCon,
holds between a 33% and a 50% interest in various partnerships
related to the Harbortown development. The Harbortown development
 is a mixed use development consisting of a 60,000 square foot
retail shopping center, a 63-slip marina, 273 rental units and 80
 low-rise condominiums located along the Detroit River. The
development consists of 35 acres of land, of which 12 are
currently undeveloped.

21



---



##### Table of Contents



ITEM 1. BUSINESS(CONCLUDED)







ITEM 2. PROPERTIES


MCN

MCN, through its principal subsidiaries, owns or leases office
space in Detroit, Grand Rapids and Traverse City, Michigan,
Houston, Texas, Denver, Colorado and Hartford, Connecticut.
MCNs facilities are suitable and adequate for their
intended use. MCNs capital investments totaled
approximately $496 million for 1999, $791 million for 1998 and
$960 million for 1997.

DIVERSIFIED ENERGY

Diversified Energy has investments that own property primarily
associated with gas gathering, processing, transmission and
storage, electric power generation and distribution and real
estate. The majority of these investments are in unconsolidated
joint ventures and partnerships in which Diversified Energy has
an ownership interest of less than or equal to 50%.

Exploration & Production Activities

MCNIC Oil & Gas Company (MOG), an indirect subsidiary of MCN,
 is engaged in natural gas and oil exploration, development and
production. During 1999, MOG sold its Western, Midcontinent/ Gulf
 Coast and Appalachian E&P properties, representing 643 Bcf
equivalent (Bcfe) of proved reserves. MOG retained its Michigan
properties, which had 463 Bcfe of proved reserves at
December 31, 1999.




|                            |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|--------------------------- |  | ----- | ------- | ---- |  | ----- | ------- | --- |  | ----- | --------- | --- |  |  | --------- |  |  |  | --------- |  |  |  | --------- | 
|                            |  |       |         |      |  |      
|                            |  | 1999  |         | 1998 |  | 1997 
|                            |  |       |         |      |  |      
|Producing Wells and Acreage |  | Gross |         | Net  |  | Gross |         | Net |  | Gross |           | Net
|                            |  |       |         |      |  |       |         |     |  |       |           |    
|Producing Wells             |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|                           
|                           
|                           
|                           
|United States               |  |       | 1,377   |      |  |       | 1,053   |     |  |       | 3,143     |     |  |  | 1,782     |  |  |  | 2,917     |  |  |  | 1,677     | 
|                            |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|Developed Lease Acreage     |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|                           
|                           
|                           
|                           
|United States               |  |       | 248,725 |      |  |       | 208,625 |     |  |       | 623,076   |     |  |  | 352,315   |  |  |  | 663,767   |  |  |  | 344,818   | 
|                            |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|Undeveloped Lease Acreage   |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 
|                           
|                           
|                           
|                           
|United States               |  |       | 410,877 |      |  |       | 213,108 |     |  |       | 2,693,767 |     |  |  | 1,148,920 |  |  |  | 2,592,915 |  |  |  | 1,239,908 | 
|                            |  |       |         |      |  |       |         |     |  |       |           |     |  |  |           |  |  |  |           |  |  |  |           | 




GAS DISTRIBUTION

MichCon operates natural gas distribution, transmission and
storage facilities in Michigan. At December 31, 1999,
MichCons distribution system included 16,997 miles of
distribution mains, 1,096,327 service lines and 1,219,256 active
meters. MichCon owns 2,651 miles of transmission and production
lines that deliver natural gas to the distribution districts and
interconnect its storage fields with the sources of supply and
the market areas. MichCon also owns properties relating to four
underground storage fields with an aggregate storage capacity of
approximately 124 Bcf. Additionally, MichCon owns district office
 buildings, service buildings and gas receiving and

22



---



##### Table of Contents



ITEM 2. PROPERTIES(CONCLUDED)


metering stations. In January 1998, MichCon purchased its
principal office building in Detroit, the Guardian Building,
ending its long-term capital lease obligation. MichCon occupies
its principal office building in Grand Rapids under a long-term
lease. Portions of these buildings are subleased to affiliates
and others.

Most of MichCons properties are held in fee, by easement,
or under lease agreements expiring at various dates to 2006, with
 renewal options extending beyond that date. The principal plants
 and properties of MichCon are held subject to the lien of
MichCons Indenture of Mortgage and Deed of Trust under
which MichCons First Mortgage Bonds are issued. Some
properties are being fully utilized, and new properties are being
 added to meet the expansion requirements of existing areas. Gas
Distributions capital investments for 1999 totaled $137
million, which compares with $159 million in 1998 and $160
million in 1997.

The Saginaw Bay Pipeline Company, a wholly owned subsidiary of
MichCon Pipeline, owns a 66 2/3% interest in the Saginaw Bay
 Area Limited Partnership, which owns substantially all of the
properties used in the conduct of its business, primarily a
126-mile gathering line. The Saginaw Bay Lateral Company, a
wholly owned subsidiary of MichCon Pipeline, owns a 46% interest
in the Saginaw Bay Lateral Limited Partnership, which owns
substantially all of the properties used in the conduct of its
business, primarily lateral lines related to the Saginaw Bay
gathering line. Westside Pipeline Company, a wholly owned
subsidiary of MichCon Pipeline, owns an 83% interest in Jordan
Valley Pipeline, a 14-mile gathering line, and the Terra-Hayes
Pipeline, an 18-mile gathering line. MichCon Gathering Company, a
 wholly owned subsidiary of MichCon Pipeline, owns substantially
all of the properties used in the conduct of its business,
including 90 miles of gathering lines and a 2,400 horsepower
compressor station.

The partners in Saginaw Bay Area Limited Partnership have agreed
to dissolve the partnership. Under the terms of the agreement,
Saginaw Bay Pipeline Company would receive the northern portion
of the 126-mile gathering line and certain other assets of the
partnership in return for its partnership interest. In
February 2000, the agreement was approved by the MPSC. The
dissolution is expected to become effective by mid-2000.

Thunder Bay Gathering Company, a wholly owned subsidiary of
MichCon Pipeline, owns substantially all of the properties used
in the conduct of its business, including 44 miles of gathering
lines.

Citizens owns all of the properties used in the conduct of its
utility business. Included in these properties is a gas
distribution system, a two-story office building in downtown
Adrian and a one-story service center.

23



---



##### Table of Contents








ITEM 3. LEGAL PROCEEDINGS


In addition to the Gas Distributions regulatory proceedings
 and other matters described in Item 1,
Business, MCN also is involved in a number of lawsuits and
administrative proceedings in the ordinary course of business
with respect to taxes, environmental matters, contracts, personal
 injury, property damage claims and other matters.

Environmental

In 1994, MichCon received a general notice of liability letter
from the Environmental Protection Agency (EPA) stating that
it was one of two potentially responsible parties at the Lower
Ecorse Creek Superfund site in Wyandotte, Michigan. The EPA
requested that MichCon conduct a remedial investigation and
feasibility study at that site. MichCon investigated its prior
activities in the area and the EPAs bases for its
conclusion, and concluded that it was not responsible for
contamination discovered at that site. MichCon informed the EPA
of this belief and did not undertake the requested activities.

In September 1996, the EPA sent MichCon a second general
notice of liability letter for the site and demanded
reimbursement of approximately $2.3 million in past costs, plus
interest. The EPA then issued MichCon and the other potentially
responsible party a unilateral administrative order under section
 106 of the Comprehensive Environmental Response Compensation and
 Liability Act to implement the remedy. The EPA estimated the
cost of the remedy to be approximately $.65 million. MichCon
again reviewed the EPAs bases for determining that it is a
potentially responsible party and concluded again that it was not
 responsible for contamination discovered at that site and
informed the EPA of its decision. In December 1999, the EPA
asked for recovery of its costs which totaled $5.1 million. The
EPA has not taken any subsequent action against MichCon. The EPA
may sue MichCon to recover the costs it incurred at the site. If
the EPA institutes and prevails in such a suit and if the court
determines that MichCon did not have sufficient cause to refuse
to comply with the order, the court may impose civil penalties
and punitive damages. Management believes that MichCon was not
responsible for contamination at the site and has sufficient
cause not to comply with this order and that the resolution of
this matter will not have a material adverse effect on MCNs
 financial statements.

Other

Since 1996, MichCon and 200 other natural gas transmission
companies, producers, gatherers and processors of natural gas
from across the United States have been defending claims filed by
 Jack Grynberg on behalf of the U.S. Government under the False
Claims Act, seeking unspecified damages for alleged underpayment
of royalties on federal and Indian lands due to purported
improper measurement of gas. The initial suit was dismissed in
1997 and that dismissal was affirmed by the District Court of
Appeals in October 1998. Mr. Grynberg refiled that suit
 in September 1997 in 77 separate federal district courts.
MichCon and MichCon Pipeline have been named in one suit in the
U.S. District Court, Eastern District of Michigan. In
April 1999, the U.S. Department of Justice declined
intervention and subsequently, the 77 separate cases were
consolidated by the Multidistrict Litigation Panel for pre-trial
proceedings in Wyoming. The case is ongoing and MichCon and
MichCon Pipeline are defending against the case. Management
believes that the claims lack merit.

24



---



##### Table of Contents



ITEM 3. LEGAL PROCEEDINGS
(CONCLUDED)


In May 1999, a class action suit was filed in Kansas state
court naming approximately 200 pipeline companies and producers,
seeking unspecified damages for alleged underpayment of royalties
 due to purported mismeasurement of gas on all natural gas
purchased in the U.S. since 1974. MichCon and MichCon Pipeline
are among those named in this suit. The case was removed to U.S.
District Court, Southern Division of Kansas, where motions to
transfer and to consolidate the case with the Grynberg False
Claims Act case have been filed. The company is defending against
 these claims and believes they lack merit.

25



---



##### Table of Contents








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


MCN held a special meeting of shareholders on December 20,
1999 to vote on a proposal to approve the Agreement and Plan of
Merger, dated as of October 4, 1999. Pursuant to the
proposal, MCN Energy Group Inc. would merge with and into DTE
Enterprises, Inc., a wholly owned subsidiary of DTE Energy
Company, and would become a wholly owned subsidiary of DTE Energy
 Company. As of November 5, 1999, the record date for
determining the number of shareholders entitled to vote at the
special meeting, there were 85,655,381 shares outstanding and
entitled to vote. Of these shares, 65,253,779 (76.2%) were
present in person or by proxy, and 20,401,602 shares were not
voted. Shareholders approved the proposed merger voting
63,992,674 (98.1%) shares in favor of the proposal, 825,891
(1.2%) shares against and 435,214 (.7%) shares to abstain.

26



---



##### Table of Contents








PART II







|        |                                          
|------- | -----------------------------------------
|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY AND

RELATED STOCKHOLDER MATTERS


MCN Common Stock is traded on the New York Stock Exchange. On
February 29, 2000 there were 20,499 holders of record of MCN
 Common Stock. Information regarding the market price of MCN
Common Stock and related security holder matters is contained in
Item 8.  Financial Statements and Supplementary
Data, page 59 of this report.

As discussed in Item 8.  Financial Statements and
 Supplementary Data, Note 10a  MCN-Obligated
Mandatorily Redeemable Preferred Securities of
Subsidiaries, page 80 of this report, MCN has the
right to extend interest payments on certain debentures. In the
event that MCN exercises this right, MCN may not declare
dividends on its common shares.

27



---



##### Table of Contents








ITEM 6. SELECTED FINANCIAL DATA


|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |        | 
|------------------------------------------------------------------------ | --------------------------------------- | ---- | --------- | -------- | - | ---- | --------- | -------- | - | ---- | --------- | ------- |  | - | --------- | ------- |  | - | --------- | ------ | 
|Selected Financial Data                                                  |                                         | 1999 |           | 1998     |   | 1997 |           | 1996     |   | 1995
|                                                                         |                                         |      |           |          |   |      |           |          |   |     
|                                                                        
|(in Thousands of Dollars  Except Per Share Amounts)                    
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Net Income (Loss)                                                        |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Continuing Operations                                                    |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Before unusual charges and merger costs |      | $         | 92,978   |   |      | $         | 103,130  |   |      | $         | 133,229 |  |   | $         | 112,569 |  |   | $         | 93,169 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Unusual charges and merger costs        |      |           | (120,954 | ) |      |           | (389,598 | ) |      |           |        |  |   |           |        |  |   |           |       | 
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (27,976   | )        |   |      | (286,468  | )        |   |      | 133,229   |         |  |   | 112,569   |         |  |   | 93,169    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Discontinued Operations                                                  |                                         |      |          |          |   |      |          |          |   |      |          |         |  |   | 37,771    |         |  |   | 3,587     |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (27,976   | )        |   |      | (286,468  | )        |   |      | 133,229   |         |  |   | 150,340   |         |  |   | 96,756    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cumulative Effect of Accounting Change, Net of Taxes                     |                                         |      | (2,872    | )        |   |      |          |          |   |      |          |         |  |   |          |         |  |   |          |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         | $    | (30,848   | )        |   | $    | (286,468  | )        |   | $    | 133,229   |         |  | $ | 150,340   |         |  | $ | 96,756    |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Cash Dividends Declared                                                  |                                         | $    | 86,256    |          |   | $    | 82,239    |          |   | $    | 72,851    |         |  | $ | 62,875    |         |  | $ | 58,193    |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Common Stock Data                                                        |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Basic Earnings (Loss) Per Share:                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Continuing Operations:                                                   |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Before unusual charges and merger costs |      | $         | 1.11     |   |      | $         | 1.31     |   |      | $         | 1.82    |  |   | $         | 1.68    |  |   | $         | 1.44   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Unusual charges and merger costs        |      |           | (1.45    | ) |      |           | (4.94    | ) |      |           |        |  |   |           |        |  |   |           |       | 
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (.34      | )        |   |      | (3.63     | )        |   |      | 1.82      |         |  |   | 1.68      |         |  |   | 1.44      |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Discontinued Operations                                                  |                                         |      |          |          |   |      |          |          |   |      |          |         |  |   | .57       |         |  |   | .05       |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (.34      | )        |   |      | (3.63     | )        |   |      | 1.82      |         |  |   | 2.25      |         |  |   | 1.49      |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cumulative Effect of Accounting Change                                   |                                         |      | (.03      | )        |   |      |          |          |   |      |          |         |  |   |          |         |  |   |          |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         | $    | (.37      | )        |   | $    | (3.63     | )        |   | $    | 1.82      |         |  | $ | 2.25      |         |  | $ | 1.49      |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Diluted Earnings (Loss) Per Share                                        |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Continuing Operations                                                    |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Before unusual charges and merger costs |      | $         | 1.11     |   |      | $         | 1.31     |   |      | $         | 1.79    |  |   | $         | 1.67    |  |   | $         | 1.43   | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Unusual charges and merger costs        |      |           | (1.45    | ) |      |           | (4.94    | ) |      |           |        |  |   |           |        |  |   |           |       | 
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (.34      | )        |   |      | (3.63     | )        |   |      | 1.79      |         |  |   | 1.67      |         |  |   | 1.43      |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Discontinued Operations                                                  |                                         |      |          |          |   |      |          |          |   |      |          |         |  |   | .56       |         |  |   | .05       |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | (.34      | )        |   |      | (3.63     | )        |   |      | 1.79      |         |  |   | 2.23      |         |  |   | 1.48      |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Cumulative Effect of Accounting Change                                   |                                         |      | (.03      | )        |   |      |          |          |   |      |          |         |  |   |          |         |  |   |          |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         | $    | (.37      | )        |   | $    | (3.63     | )        |   | $    | 1.79      |         |  | $ | 2.23      |         |  | $ | 1.48      |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Book Value Per Share                                                     |                                         | $    | 9.56      |          |   | $    | 9.93      |          |   | $    | 14.62     |         |  | $ | 11.66     |         |  | $ | 10.02     |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Return on Average Common Shareholders Equity,
	Before Accounting Change |                                         |      | (3.5      | )%       |   |      | (29.6     | )%       |   |      | 13.8      | %       |  |   | 15.8      | %       |  |   | 16.5      | %     
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Average Common Shares Outstanding (000):                                 |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Basic                                   |      |           | 83,407   |   |      |           | 78,823   |   |      |           | 72,887  |  |   |           | 66,944  |  |   |           | 64,743 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|                                                                         | Diluted                                 |      |           | 83,407   |   |      |           | 78,823   |   |      |           | 75,435  |  |   |           | 67,521  |  |   |           | 65,144 | 
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Actual Common Shares Outstanding (000)                                   |                                         |      | 85,655    |          |   |      | 79,725    |          |   |      | 78,232    |         |  |   | 67,304    |         |  |   | 66,370    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Property, Plant and Equipment                                            |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Gas Distribution                                                         |                                         | $    | 3,016,231 |          |   | $    | 2,916,540 |          |   | $    | 2,813,434 |         |  | $ | 2,689,039 |         |  | $ | 2,496,711 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Diversified Energy                                                       |                                         |      | 696,239   |          |   |      | 1,124,877 |          |   |      | 1,373,340 |         |  |   | 1,028,518 |         |  |   | 663,843   |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         |      | 3,712,470 |          |   |      | 4,041,417 |          |   |      | 4,186,774 |         |  |   | 3,717,557 |         |  |   | 3,160,554 |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|LessAccumulated Depreciation and Depletion                              |                                         |      | 1,697,212 |          |   |      | 1,644,094 |          |   |      | 1,488,050 |         |  |   | 1,335,201 |         |  |   | 1,223,808 |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         | $    | 2,015,258 |          |   | $    | 2,397,323 |          |   | $    | 2,698,724 |         |  | $ | 2,382,356 |         |  | $ | 1,936,746 |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Assets                                                                   |                                         | $    | 4,239,054 |          |   | $    | 4,392,898 |          |   | $    | 4,330,937 |         |  | $ | 3,633,404 |         |  | $ | 2,898,640 |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Capital Investments                                                      |                                         | $    | 496,379   |          |   | $    | 790,930   |          |   | $    | 959,610   |         |  | $ | 790,748   |         |  | $ | 688,838   |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|Capitalization                                                           |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Long-Term Debt, Including Capital Lease Obligations                      |                                         | $    | 1,457,617 |          |   | $    | 1,307,168 |          |   | $    | 1,212,564 |         |  | $ | 1,252,040 |         |  | $ | 993,407   |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Redeemable Cumulative Preferred Securities                               |                                         |      | 402,922   |          |   |      | 502,203   |          |   |      | 505,104   |         |  |   | 173,809   |         |  |   | 96,449    |       
|                                                                        
|                                                                        
|                                                                        
|                                                                        
|Common Shareholders Equity                                              |                                         |      | 818,508   |          |   |      | 791,922   |          |   |      | 1,143,951 |         |  |   | 784,568   |         |  |   | 664,776   |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       
|                                                                         |                                         | $    | 2,679,047 |          |   | $    | 2,601,293 |          |   | $    | 2,861,619 |         |  | $ | 2,210,417 |         |  | $ | 1,754,632 |       
|                                                                         |                                         |      |           |          |   |      |           |          |   |      |           |         |  |   |           |         |  |   |           |       




28



---



##### Table of Contents



ITEM 6. SELECTED FINANCIAL DATA
(CONCLUDED)


|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |         |        | 
|---------------------------------------------------- | --------------------------- | ---------------------------------------- | --------------------------- | ------- | ------- | ------ | --------- | ------- | ------- | ------ | --------- | --------- | ------- | ------ | --------- | --------- | ------- | ------ | --------- | ------- | ------- | ------ | 
|Selected Financial Data                              |                             | 1999                                     |                             | 1998    |         | 1997   |           | 1996    |         | 1995  
|                                                     |                             |                                          |                             |         |         |        |           |         |         |       
|                                                    
|(in Thousands of Dollars  Except Per Share Amounts)
|                                                    
|                                                    
|                                                    
|                                                    
|Operating Revenues                                   |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Diversified Energy                                   |                             | $                                        | 1,324,690                   |         |         | $      | 992,828   |         |         | $      | 951,269   |           |         | $      | 734,441   |           |         | $      | 400,027   |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|Gas Distribution                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gas sales                   |                                          |                             | 924,580 |         |        |           | 838,876 |         |        |           | 1,080,104 |         |        |           | 1,102,957 |         |        |           | 931,940 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | End user transportation     |                                          |                             | 103,879 |         |        |           | 82,275  |         |        |           | 84,749    |         |        |           | 82,467    |         |        |           | 80,808  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Intermediate transportation |                                          |                             | 57,783  |         |        |           | 63,218  |         |        |           | 55,221    |         |        |           | 48,570    |         |        |           | 41,985  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                       |                                          |                             | 84,358  |         |        |           | 67,405  |         |        |           | 51,212    |         |        |           | 42,260    |         |        |           | 52,913  |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             |                                          | 1,170,600                   |         |         |        | 1,051,774 |         |         |        | 1,271,286 |           |         |        | 1,276,254 |           |         |        | 1,107,646 |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|Less Intercompany Transactions                       |                             |                                          | 14,222                      |         |         |        | 13,904    |         |         |        | 14,688    |           |         |        | 13,427    |           |         |        | 12,441    |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             | $                                        | 2,481,068                   |         |         | $      | 2,030,698 |         |         | $      | 2,207,867 |           |         | $      | 1,997,268 |           |         | $      | 1,495,232 |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|Effect of Weather                                    |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Percent Colder (Warmer) Than Normal                  |                             |                                          | (9.0                        | )%      |         |        | (19.3     | )%      |         |        | .8        | %         |         |        | 5.4       | %         |         |        | .3        | %      
|Increase (Decrease) From Normal in                   |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gas markets (MMcf)          |                                          |                             | (18,732 | )       |        |           | (40,272 | )       |        |           | 589       |         |        |           | 10,909    |         |        |           | 1,488   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income                  |                                          | $                           | (18,592 | )       |        | $         | (35,314 | )       |        | $         | 467       |         |        | $         | 9,886     |         |        | $         | 1,415   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Diluted earnings per share  |                                          | $                           | (.22    | )       |        | $         | (.45    | )       |        | $         | .01       |         |        | $         | .15       |         |        | $         | .02     |        
|                                                    
|                                                    
|                                                    
|                                                    
|Operating Statistics                                 |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|Diversified Energy (1)                               |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     | Pipelines & Processing      |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |        
|                                                     |                             | Gas processed (MMcf)                     |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |         |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             |                                          | Carbon dioxide treatment    |         |         | 51,807 |           |         |         | 48,868 |           |           |         | 42,761 |           |           |         | 44,223 |           |         |         | 14,588 | 
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             |                                          | Natural gas liquids removal |         |         | 73,065 |           |         |         | 45,082 |           |           |         | 21,764 |           |           |         | 7,446  |           |         |         |       | 
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             |                                          | 124,872                     |         |         |        | 93,950    |         |         |        | 64,525    |           |         |        | 51,669    |           |         |        | 14,588    |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             | Methanol produced (thousand gallons)     |                             |         | 57,419  |        |           |         | 60,446  |        |           |           | 60,810  |        |           |           | 10,545  |        |           |         |        |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Transportation (MMcf)                    |                             |         | 208,618 |        |           |         | 175,466 |        |           |           | 115,975 |        |           |           | 86,391  |        |           |         | 4,994   |       
|                                                     | Electric Power              |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Electricity sales (thousands of MWh)     |                             |         | 2,756   |        |           |         | 3,805   |        |           |           | 1,843   |        |           |           | 709     |        |           |         | 272     |       
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     | Energy Marketing (MMcf)     |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Gas sales                                |                             |         | 585,717 |        |           |         | 454,681 |        |           |           | 343,719 |        |           |           | 218,952 |        |           |         | 170,668 |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Exchange gas deliveries                  |                             |         | 11,882  |        |           |         | 11,061  |        |           |           | 15,109  |        |           |           | 22,586  |        |           |         | 16,462  |       
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             |                                          | 597,599                     |         |         |        | 465,742   |         |         |        | 358,828   |           |         |        | 241,538   |           |         |        | 187,130   |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     | Exploration & Production    |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Gas production (MMcf)                    |                             |         | 61,838  |        |           |         | 82,040  |        |           |           | 78,218  |        |           |           | 57,202  |        |           |         | 31,420  |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Oil production (MBbl)                    |                             |         | 1,164   |        |           |         | 2,635   |        |           |           | 3,346   |        |           |           | 1,086   |        |           |         | 388     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                             | Gas and oil production (MMcf equivalent) |                             |         | 68,822  |        |           |         | 97,850  |        |           |           | 98,294  |        |           |           | 63,718  |        |           |         | 33,748  |       
|Gas Distribution (MMcf)                              |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Gas sales                   |                                          |                             | 181,756 |         |        |           | 172,177 |         |        |           | 209,092   |         |        |           | 220,958   |         |        |           | 209,816 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | End user transportation     |                                          |                             | 152,036 |         |        |           | 140,315 |         |        |           | 145,101   |         |        |           | 146,895   |         |        |           | 145,761 |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Intermediate transportation |                                          |                             | 531,912 |         |        |           | 537,532 |         |        |           | 586,496   |         |        |           | 527,510   |         |        |           | 374,428 |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                     |                             |                                          | 865,704                     |         |         |        | 850,024   |         |         |        | 940,689   |           |         |        | 895,363   |           |         |        | 730,005   |        
|                                                     |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|Gas Distribution Customers                           |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Residential                                          |                             |                                          | 1,080,455                   |         |         |        | 1,117,977 |         |         |        | 1,105,749 |           |         |        | 1,100,101 |           |         |        | 1,090,039 |        
|                                                    
|                                                    
|                                                    
|                                                    
|Total                                                |                             |                                          | 1,219,510                   |         |         |        | 1,205,628 |         |         |        | 1,193,122 |           |         |        | 1,183,443 |           |         |        | 1,172,613 |        
|                                                    
|                                                    
|                                                    
|                                                    
|Employees                                            |                             |                                          |                             |         |         |        |           |         |         |        |           |           |         |        |           |           |         |        |           |        
|                                                    
|                                                    
|                                                    
|                                                    
|Diversified Energy                                   |                             |                                          | 209                         |         |         |        | 213       |         |         |        | 289       |           |         |        | 243       |           |         |        | 219       |        
|                                                    
|                                                    
|                                                    
|                                                    
|Gas Distribution                                     |                             |                                          | 2,761                       |         |         |        | 2,773     |         |         |        | 2,920     |           |         |        | 3,117     |           |         |        | 3,183     |        




|    |                                       
|--- | --------------------------------------
|(1) | Includes MCNs share of joint ventures

29



---



##### Table of Contents








|        |                                                   
|------- | --------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS OF
	FINANCIAL

CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Results for 1999 reflect unusual charges, asset sales,
earnings from new gas sales program and more favorable weather  MCN experienced a net loss of $30.8 million, or
$.37 per share in 1999, compared to a net loss of $286.5 million,
 or $3.63 per share in 1998. As subsequently discussed, both
years reflect several unusual charges totaling $98.3 million, or
$1.18 per share in 1999 and $389.6 million, or $4.94 per share in
 1998. Additionally, 1999 results include merger costs that
reduced earnings by $22.7 million or $.27 per share, as well as a
 change in accounting for start-up costs that reduced earnings by
 $2.8 million or $.03 per share. Excluding the unusual charges,
merger costs and accounting change, MCN had 1999 earnings of
$93.0 million, or $1.11 per share compared to 1998 earnings of
$103.1 million, or $1.31 per share. The earnings comparisons
reflect the effects of reduced contributions from Diversified
Energys operating segments, largely due to asset sales,
which more than offset the benefits of MichCons new gas
sales program and more favorable weather.

|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |       | 
|--------------------------------------------------------------- | ------------------------------------- | ---- | ------ | ----- | - | ---- | ------ | ------ | - | - | ----- | ----- | 
|                                                               
|                                                               
|                                                                |                                       | 1999 |        | 1998  |   | 1997
|                                                                |                                       |      |        |       |   |     
|Net Income (Loss)(in Millions)                                  |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                               
|                                                               
|                                                               
|                                                               
|Diversified Energy:                                             |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Before unusual charges & merger costs |      | $      | (27.2 | ) |      | $      | 14.7   |   |   | $     | 52.1  | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Unusual charges (Note 3)              |      |        | (98.3 | ) |      |        | (372.9 | ) |   |       |      | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Merger costs (Note 2)                 |      |        | (5.9  | ) |      |        |       |   |   |       |      | 
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                                |                                       |      | (131.4 | )     |   |      | (358.2 | )      |   |   | 52.1  |      
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|Gas Distribution:                                               |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Before unusual charges & merger costs |      |        | 120.2 |   |      |        | 88.4   |   |   |       | 81.1  | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Unusual charges (Note 3f)             |      |        |      |   |      |        | (16.7  | ) |   |       |      | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Merger costs (Note 2)                 |      |        | (16.8 | ) |      |        |       |   |   |       |      | 
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                                |                                       |      | 103.4  |       |   |      | 71.7   |        |   |   | 81.1  |      
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|Total Before Accounting Change:                                 |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Before unusual charges & merger costs |      |        | 93.0  |   |      |        | 103.1  |   |   |       | 133.2 | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Unusual charges (Note 3)              |      |        | (98.3 | ) |      |        | (389.6 | ) |   |       |      | 
|                                                               
|                                                               
|                                                               
|                                                               
|                                                                | Merger costs (Note 2)                 |      |        | (22.7 | ) |      |        |       |   |   |       |      | 
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                                |                                       |      | (28.0  | )     |   |      | (286.5 | )      |   |   | 133.2 |      
|                                                               
|                                                               
|                                                               
|                                                               
|Cumulative Effect of Accounting Change, Net of Taxes (Note 
	5) |                                       |      | (2.8   | )     |   |      |       |        |   |   |      |      
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                                |                                       | $    | (30.8  | )     |   | $    | (286.5 | )      |   | $ | 133.2 |      
|                                                                |                                       |      |        |       |   |      |        |        |   |   |       |      
|                                                               

30



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

|                                                |                                       |      |       |       |   |      |       |       |   |   |      |      | 
|----------------------------------------------- | ------------------------------------- | ---- | ----- | ----- | - | ---- | ----- | ----- | - | - | ---- | ---- | 
|                                               
|                                               
|                                                |                                       | 1999 |       | 1998  |   | 1997
|                                                |                                       |      |       |       |   |     
|Diluted Earnings (Loss) Per Share               |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                               
|                                               
|                                               
|                                               
|Diversified Energy:                             |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual charges & merger costs |      | $     | (.33  | ) |      | $     | .19   |   |   | $    | .72  | 
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual charges (Note 3)              |      |       | (1.18 | ) |      |       | (4.73 | ) |   |      |     | 
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |      |       | (.07  | ) |      |       |      |   |   |      |     | 
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                                |                                       |      | (1.58 | )     |   |      | (4.54 | )     |   |   | .72  |     
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|Gas Distribution:                               |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual charges & merger costs |      |       | 1.44  |   |      |       | 1.12  |   |   |      | 1.07 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual charges (Note 3f)             |      |       |      |   |      |       | (.21  | ) |   |      |     | 
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |      |       | (.20  | ) |      |       |      |   |   |      |     | 
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                                |                                       |      | 1.24  |       |   |      | .91   |       |   |   | 1.07 |     
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|Total Before Accounting Change:                 |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual charges & merger costs |      |       | 1.11  |   |      |       | 1.31  |   |   |      | 1.79 | 
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual charges (Note 3)              |      |       | (1.18 | ) |      |       | (4.94 | ) |   |      |     | 
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |      |       | (.27  | ) |      |       |      |   |   |      |     | 
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                                |                                       |      | (.34  | )     |   |      | (3.63 | )     |   |   | 1.79 |     
|                                               
|                                               
|                                               
|                                               
|Cumulative Effect of Accounting Change (Note 5) |                                       |      | (.03  | )     |   |      |      |       |   |   |     |     
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     
|                                                |                                       | $    | (.37  | )     |   | $    | (3.63 | )     |   | $ | 1.79 |     
|                                                |                                       |      |       |       |   |      |       |       |   |   |      |     




MCNs results in 1998 before unusual charges decreased $30.1
 million, or $.48 per diluted share from 1997 earnings of $133.2
million, or $1.79 per diluted share. The decline reflects low
energy prices, abnormally warm weather and higher financing
costs, partially offset by reduced operating costs in the Gas
Distribution segment. All per share comparisons were also
affected by an increase in the average number of shares
outstanding due to the issuance of 5,865,000 shares in
April 1999 and 9,775,000 shares in June 1997.

Strategic direction  MCNs
objective is to achieve competitive long-term returns for its
shareholders. In 1999, MCN significantly revised its strategic
direction that now includes: focusing on the Midwest-to-Northeast
 region; emphasizing operational efficiencies and growth through
the integration of existing businesses; and reducing capital
investment levels to approximately $150 million to $350 million
annually.

To achieve the operating efficiencies from the new strategic
direction, MCN is reorganizing into the following business
segments: Gas Distribution; Midstream & Supply; Energy
Marketing; Power; and Energy Holdings. MCN expects to begin
reporting its operating results based on the new segments in
2000.

Gas Distributionis responsible for MCNs regulated
operations that serve more than 1.2 million customers in
Michigan.

Midstream & Supplydevelops and manages MCNs gas
 producing, gathering, processing, storage and transmission
facilities within the Midwest-to-Northeast target region. It also
 integrates all of MCNs gas-supply functions,
including purchasing the commodity and aggregating the

31



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

transportation and storage capacity required to deliver gas to
the Gas Distribution and Energy Marketing segments.

Energy Marketingconsists of MCNs non-regulated
marketing activities to industrial, commercial and residential
customers, both inside and outside the Gas Distribution
segments service areas.

Powerdevelops and manages independent power projects that
 produce electricity and other useful forms of thermal energy,
such as steam.

Energy Holdingsmanages and seeks to maximize the value of
 existing ventures outside MCNs target region. It primarily
 consists of gas gathering and processing investments in major
U.S. producing basins, as well as non-regional electric power
ventures.

Pending merger  MCN and DTE Energy
Company (DTE) have signed a definitive merger agreement dated
October 4, 1999 under which DTE will acquire all outstanding
 shares of MCN common stock. The boards of directors and
shareholders of both companies have approved the proposed merger.
 The transaction is subject to regulatory approvals and other
customary merger conditions. The transaction is expected to close
 in mid-2000 and will be accounted for as a purchase by DTE. The
combined company, which will be named DTE Energy Company and
headquartered in Detroit, will be the largest electric and gas
utility in Michigan. In 1999, MCN recorded legal, accounting,
employee benefit and other expenses associated with the merger
which had the effect of reducing 1999 results by $22.7 million or
 $.27 per share. MCN will incur additional merger-related costs
in the first half of 2000. Further information regarding the
merger agreement is included in Note 2 to the Consolidated
Financial Statements included herein.

Unusual charges  As previously
discussed, MCN recorded several unusual charges in 1999 and 1998,
 consisting of losses on the sale of properties, property
write-downs, investment and contract losses, and restructuring
charges. The unusual charges reduced 1999 earnings by $98.3
million or $1.18 per share and 1998 earnings by $389.6 million or
 $4.94 per share. A detailed discussion of each unusual charge by
 segment follows:




|                                        |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |       |  
|--------------------------------------- | ---------------------------------- | ---- | ----- | ------- | - | ---- | ----- | ------- | - | - | ------ | ------ | - | - | ----- | ----- | -
|                                        |                                    |      |       |        
|                                        |                                    | 1999 |       | 1998   
|                                        |                                    |      |       |        
|                                        |                                    | Net  |       | Diluted |   | Net  |       | Diluted
|                                        |                                    | Loss |       | EPS     |   | Loss |       | EPS    
|(in Millions, Except Per Share Amounts) |                                    |      |       |         |   |      |       |        
|Unusual Charges                         |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |      
|                                       
|                                       
|                                       
|                                       
|Diversified Energy:                     |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |      
|                                       
|                                       
|                                       
|                                       
|                                        | Pipelines & Processing (Note 3a)   |      | $     |        |   |      | $     |        |   |   | $      | (89.5  | ) |   | $     | (1.13 | )
|                                       
|                                       
|                                       
|                                       
|                                        | Electric Power (Note 3b)           |      |       | (3.2    | ) |      |       | (.04    | ) |   |        | (1.6   | ) |   |       | (.02  | )
|                                       
|                                       
|                                       
|                                       
|                                        | Energy Marketing (Note 3c)         |      |       | (1.6    | ) |      |       | (.02    | ) |   |        |       |   |   |       |      |  
|                                       
|                                       
|                                       
|                                       
|                                        | Exploration & Production (Note 3d) |      |       | (93.5   | ) |      |       | (1.12   | ) |   |        | (275.0 | ) |   |       | (3.49 | )
|                                       
|                                       
|                                       
|                                       
|                                        | Corporate & Other (Note 3e)        |      |       |        |   |      |       |        |   |   |        | (6.8   | ) |   |       | (.09  | )
|                                        |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |      
|                                        |                                    |      | (98.3 | )       |   |      | (1.18 | )       |   |   | (372.9 | )      |   |   | (4.73 | )    
|                                       
|                                       
|                                       
|                                       
|                                       
|Gas Distribution (Note 3f)              |                                    |      |      |         |   |      |      |         |   |   | (16.7  | )      |   |   | (.21  | )    
|                                        |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |      
|                                        |                                    | $    | (98.3 | )       |   | $    | (1.18 | )       |   | $ | (389.6 | )      |   | $ | (4.94 | )    
|                                        |                                    |      |       |         |   |      |       |         |   |   |        |        |   |   |       |      




32



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Pipelines & Processingrecorded in 1998 a $133.8
million pre-tax ($87.0 million net of taxes) write-off of its
coal fines project. The economic viability of the project is
dependent on coal briquettes produced from six coal fines plants
qualifying for synthetic fuel tax credits and MCNs ability
to utilize or sell such credits. Although the plants were in
service by June 30, 1998, the date specified to qualify for
the tax credits, operating delays at the plants in the 1998 third
 quarter significantly increased the possibility that the
Internal Revenue Service (IRS) would challenge the projects
 eligibility for tax credits. In addition, there was uncertainty
as to whether MCN could utilize or sell the credits. These
factors led to MCNs decision to record an impairment loss
equal to the carrying value of the plants, reflecting the likely
inability to recover such costs. MCN sought to maximize the value
 of its investment in the coal fines project, and in May 1999
filed a request with the IRS seeking a factual determination that
 its coal fines plants were in service on June 30, 1998. In
September 1999, MCN received in-service determination
 letters from the IRS with respect to its six coal fines plants.
The IRS ruled that four of the plants were in service by the
June 30, 1998 deadline in order to qualify for synthetic
fuel tax credits. The IRS ruled that two other plants did not
meet the in-service requirements. The company continues to
believe these two plants also meet the requirements and appealed
the unfavorable rulings. In December 1999, MCN sold its four coal
 fines plants that received in-service determination
letters to DTE (Note 4a).

During 1998, MCN also recorded an impairment loss of $3.9 million
 pre-tax ($2.5 million net of taxes) relating to an acquired
out-of-service pipeline in Michigan. MCN reviewed the business
alternatives for this asset and determined that its development
is unlikely. Accordingly, MCN recorded an impairment loss equal
to the carrying value of this asset.

Electric Powerrecorded in 1999 a $5.0 million pre-tax
($3.2 million net of taxes) write-off of capitalized costs
associated with the exiting of two power projects under
development that were not consistent with its new strategic
direction. During 1998, Electric Power also recorded a $2.5
million pre-tax ($1.6 million net of taxes) restructuring charge
related to exiting certain international power projects.

Energy Marketingrecorded in 1999 a $2.4 million pre-tax
loss ($1.6 million net of taxes) resulting from the termination
of its gas sales contracts with a 49% owned joint venture. The
contracts were terminated in conjunction with the sale of
MCNs interest in the joint venture.

Exploration & Productionrecorded in 1999 a $52.0
million pre-tax ($33.8 million net of taxes) write-down of its
gas and oil properties under the full cost method of accounting,
due primarily to an unfavorable revision in the timing of the
production of proved gas and oil reserves as well as reduced
expectations of sales proceeds on unproved acreage. Under the
full cost method of accounting as prescribed by the Securities
and Exchange Commission (SEC), MCNs capitalized exploration
 and production costs exceeded the full cost ceiling,
 resulting in the excess being written off to income. The ceiling
 is the sum of discounted future net cash flows from the
production of proved gas and oil reserves, and the lower of cost
or estimated fair value of unproved properties, net of related
income tax effects. During 1998, MCN recognized write-downs of
its gas and oil properties totaling $416.9 million pre-tax
($271.0 million net of taxes). The write-downs were also the
result of MCNs capitalized exploration and production costs
 exceeding the full cost ceiling.

33



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

During 1999, E&P recorded a $2.3 million pre-tax ($1.5
million net of taxes) write-down relating to unproved property
that is excluded from the full cost pool. An impairment loss was
recorded representing the amount by which the carrying value of
the property exceeded its appraised value.

MCN recognized in 1999 losses from the sale of its Western,
Midcontinent/ Gulf Coast and Appalachian E&P properties
totaling $82.0 million pre-tax ($53.3 million net of taxes).

Additionally, MCN recognized in 1999 a $7.5 million pre-tax ($4.9
 million net of taxes) loss from the write-down of an investment
in the common stock of an E&P company. MCN had also
recognized a $6.1 million pre-tax loss ($4.0 million net of
taxes) from the write-down of this investment during 1998. The
losses were due to declines in the fair value of the securities
that are not considered temporary. MCN has no carrying value in
this investment after the write-downs.

Corporate & Otherrecorded in 1998 a $10.4 million
pre-tax ($6.8 million net of taxes) restructuring charge related
to a corporate realignment designed to improve operating
efficiencies through a more streamlined organizational structure.
 The realignment included cost saving initiatives expected to
reduce operating expenses.

Gas Distributionrecorded in 1998 a $24.8 million pre-tax
($11.2 million net of taxes and minority interest) write-down of
certain gas gathering properties. An analysis revealed that
projected cash flows from the gathering system were not
sufficient to cover the systems carrying value. Therefore,
an impairment loss was recorded representing the amount by which
the carrying value of the system exceeded its estimated fair
value.

During 1998, MCN also recorded an $8.5 million pre-tax ($5.5
million net of taxes) loss from the write-down of an investment
in a Missouri gas distribution company. The write-down represents
 the amount by which the carrying value exceeded the estimated
fair value of the investment.

Diversified Energy

Results reflect unusual charges and reduced earnings due to
asset sales  Diversified Energy had a loss in 1999
 of $131.4 million compared to a loss in 1998 of $358.2 million.
The comparison was impacted by unusual charges and merger costs
as previously discussed. Excluding the unusual charges and merger
 costs, Diversified Energy had a 1999 loss of $27.2 million
compared to 1998 earnings of $14.7 million. These results
primarily reflect reduced earnings attributable to the sale of
E&P properties and joint venture interest in power projects.
Additionally, the 1999 decline is due to higher financing costs
and increased losses from the Energy Marketing segment.

Excluding the unusual charges, Diversified Energys earnings
 for 1998 declined by $37.4 million from 1997 earnings of $52.1
million. These results reflect increased financing costs and
reduced contributions from the Pipelines & Processing
and E&P segments due to low energy prices as well as

34



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

increased losses from the Energy Marketing segment. Partially
offsetting the decreases for 1998 was increased operating and
joint venture income posted by the Electric Power segment.




|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |       |  
|------------------------------------ | ------------------------------------------------------- | ---- | ------- | ------- | - | ---- | ------- | ------ | - | - | ----- | ----- | -
|                                     |                                                         | 1999 |         | 1998    |   | 1997
|(in Millions)                        |                                                         |      |         |         |   |     
|                                     |                                                         |      |         |         |   |     
|                                    
|                                    
|                                    
|                                    
|Diversified Energy Operations        |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                    
|                                    
|                                    
|                                    
|Operating Revenues*                  |                                                         | $    | 1,324.7 |         |   | $    | 992.8   |        |   | $ | 951.3 |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Operating Expenses*                  |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                    
|                                    
|                                    
|                                    
|                                     | Property write-downs and restructuring charges (Note 3) |      |         | 59.3    |   |      |         | 567.5  |   |   |       |      |  
|                                    
|                                    
|                                    
|                                    
|                                     | Merger costs (Note 2)                                   |      |         | 9.1     |   |      |         |       |   |   |       |      |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                                   |      |         | 1,330.6 |   |      |         | 989.6  |   |   |       | 905.7 |  
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                     |                                                         |      | 1,399.0 |         |   |      | 1,557.1 |        |   |   | 905.7 |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Operating Income (Loss)              |                                                         |      | (74.3   | )       |   |      | (564.3  | )      |   |   | 45.6  |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Equity in Earnings of Joint Ventures |                                                         |      | 50.4    |         |   |      | 61.2    |        |   |   | 53.1  |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Other Income & (Deductions)*         |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                    
|                                    
|                                    
|                                    
|                                     | Interest income                                         |      |         | 4.2     |   |      |         | 5.2    |   |   |       | 6.7   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense                                        |      |         | (63.4   | ) |      |         | (54.3  | ) |   |       | (32.2 | )
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends on preferred securities                       |      |         | (40.1   | ) |      |         | (36.4  | ) |   |       | (31.1 | )
|                                    
|                                    
|                                    
|                                    
|                                     | Loss on sale of E&P properties (Note 3d)                |      |         | (82.0   | ) |      |         |       |   |   |       |      |  
|                                    
|                                    
|                                    
|                                    
|                                     | Investment and contract losses (Notes 3c & 3d)          |      |         | (9.9    | ) |      |         | (6.1   | ) |   |       |      |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                                   |      |         | 18.9    |   |      |         | 20.2   |   |   |       | 10.1  |  
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                     |                                                         |      | (172.3  | )       |   |      | (71.4   | )      |   |   | (46.5 | )    
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Income (Loss) Before Income Taxes    |                                                         |      | (196.2  | )       |   |      | (574.5  | )      |   |   | 52.2  |      
|                                    
|                                    
|                                    
|                                    
|Income Tax Provision (Benefit)       |                                                         |      | (64.8   | )       |   |      | (216.3  | )      |   |   | .1    |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|Net Income (Loss)                    |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                    
|                                    
|                                    
|                                    
|                                     | Before unusual items                                    |      |         | (27.2   | ) |      |         | 14.7   |   |   |       | 52.1  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual charges and merger costs (Notes 2 & 3)          |      |         | (104.2  | ) |      |         | (372.9 | ) |   |       |      |  
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      
|                                     |                                                         | $    | (131.4  | )       |   | $    | (358.2  | )      |   | $ | 52.1  |      
|                                     |                                                         |      |         |         |   |      |         |        |   |   |       |      




|  |                                   
|- | ----------------------------------
|* | Includes intercompany transactions

Operating and Joint Venture Income

Operating and joint venture results, excluding the unusual
charges and merger costs, declined $19.8 million in 1999 and
$34.3 million in 1998. A discussion of each business segment, its
 contributions and its outlook follows.



---

|                                               |                          |      |       |       |   |      |        |      |   |   |      |      |  
|---------------------------------------------- | ------------------------ | ---- | ----- | ----- | - | ---- | ------ | ---- | - | - | ---- | ---- | -
|                                               |                          | 1999 |       | 1998  |   | 1997
|(in Millions)                                  |                          |      |       |       |   |     
|                                               |                          |      |       |       |   |     
|                                              
|                                              
|                                              
|                                              
|Operating and Joint Venture Income (Loss)      |                          |      |       |       |   |      |        |      |   |   |      |     
|                                              
|                                              
|                                              
|                                              
|Before Unusual Items:                          |                          |      |       |       |   |      |        |      |   |   |      |     
|                                              
|                                              
|                                              
|                                              
|                                               | Pipelines & Processing   |      | $     | 19.2  |   |      | $      | 21.4 |   |   | $    | 29.1 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Electric Power           |      |       | 22.9  |   |      |        | 26.0 |   |   |      | 18.1 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Energy Marketing         |      |       | (11.4 | ) |      |        | (3.6 | ) |   |      | (2.3 | )
|                                              
|                                              
|                                              
|                                              
|                                               | Exploration & Production |      |       | 14.7  |   |      |        | 29.0 |   |   |      | 58.1 |  
|                                              
|                                              
|                                              
|                                              
|                                               | Corporate & Other        |      |       | (.8   | ) |      |        | (8.4 | ) |   |      | (4.3 | )
|                                               |                          |      |       |       |   |      |        |      |   |   |      |     
|                                               |                          |      | 44.6  |       |   |      | 64.4   |      |   |   | 98.7 |     
|                                              
|                                              
|                                              
|                                              
|Unusual Charges and Merger Costs (Notes 2 & 3) |                          |      | (68.4 | )     |   |      | (567.5 | )    |   |   |     |     
|                                               |                          |      |       |       |   |      |        |      |   |   |      |     
|                                               |                          | $    | (23.8 | )     |   | $    | (503.1 | )    |   | $ | 98.7 |     
|                                               |                          |      |       |       |   |      |        |      |   |   |      |     




35



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Pipelines & Processingoperating and joint venture
income, excluding the write-offs, decreased $2.2 million in 1999
and $7.7 million in 1998. The 1999 decline reflects reduced
contributions from its investments in the 16%-owned Portland
Natural Gas Transmission System (PNGTS), a 292-mile pipeline
capable of transporting up to 360 MMcf per day, and the 25%-owned
 Lyondell Methanol Company, L.P. (Lyondell), a 248 million
gallon-per-year methanol production plant. Pipelines &
Processing 1999 results reflect a decline in allowance for
funds used during construction (AFUDC) associated with
 the PNGTS project that was placed in service early in 1999. The
reduced contributions from Lyondell are attributable to lower
methanol margins as well as lower methanol volumes produced.
Earnings from the methanol production business benefited from
strong methanol prices during 1997 and early 1998, but prices and
 margins have since weakened. Lyondells average methanol
sales prices declined 3% in 1999. Methanol production declined
3.0 million gallons in 1999 due primarily to the shutdown of the
methanol plant for scheduled maintenance in March 1999.

The 1999 results also include losses from Pipelines &
Processings investment in a 75%-owned asphalt manufacturing
 partnership. During 1999, the partnership completed construction
 of a plant designed to produce up to 100,000 tons of
high-quality asphalt annually. The plant is currently
experiencing difficulties in producing economical quantities of
asphalt and MCN is working to resolve the issues.

Pipelines & Processing 1999 operating and joint venture
income was also affected by an increase in gas transportation
volumes, as well as an increase in the level of gas processed to
remove carbon dioxide (CO2) and to remove natural gas
liquids (NGLs). These improvements are due to the acquisition and
 expansion of pipeline and processing facilities over the past
several years. In 1999, transportation volumes increased
33.1 Bcf, gas processed to remove CO2 increased
2.9 Bcf and gas processed to remove NGLs increased
28 Bcf. Although there was an increase in the level of gas
processed to remove CO2, earnings were not
significantly affected since under the terms of Pipelines &
Processing CO2 processing contracts, revenues are not
volume sensitive.



---

|                                    |                             |      |       |      |  |      |       |      |  |  |       |      | 
|----------------------------------- | --------------------------- | ---- | ----- | ---- |  | ---- | ----- | ---- |  |  | ----- | ---- | 
|                                    |                             | 1999 |       | 1998 |  | 1997
|                                    |                             |      |       |      |  |     
|Pipelines & Processing Statistics*  |                             |      |       |      |  |      |       |      |  |  |       |     
|                                   
|                                   
|                                   
|                                   
|Methanol Produced (million gallons) |                             |      | 57.4  |      |  |      | 60.4  |      |  |  | 60.8  |     
|                                   
|                                   
|                                   
|                                   
|Transportation (Bcf)                |                             |      | 208.6 |      |  |      | 175.5 |      |  |  | 116.0 |     
|Gas Processed (Bcf)                 |                             |      |       |      |  |      |       |      |  |  |       |     
|                                   
|                                   
|                                   
|                                   
|                                    | Carbon dioxide treatment    |      |       | 51.8 |  |      |       | 48.9 |  |  |       | 42.8 | 
|                                   
|                                   
|                                   
|                                   
|                                    | Natural gas liquids removal |      |       | 73.1 |  |      |       | 45.1 |  |  |       | 21.8 | 
|                                    |                             |      |       |      |  |      |       |      |  |  |       |     
|                                    |                             |      | 124.9 |      |  |      | 94.0  |      |  |  | 64.6  |     
|                                    |                             |      |       |      |  |      |       |      |  |  |       |     




|  |                                       
|- | --------------------------------------
|* | Includes MCNs share of joint ventures

The decrease in Pipelines & Processing 1998 income reflects
lower contributions from its methanol production investment.
Earnings from the methanol business reflect an approximate 40%
decrease in methanol prices during 1998 resulting in a $13
million unfavorable impact on joint venture income as compared to
 1997. In addition, the Pipelines & Processing segment
incurred $9.1 million of

36



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

operating losses in 1998 related to the start up of the coal
fines project. As discussed earlier, the coal fines project was
written-off during late 1998 and did not have a significant
impact on 1999 earnings.

Partially offsetting the effect of lower methanol prices and coal
 fines losses in 1998 were increased contributions from gas
pipeline and processing ventures due to the acquisition and
expansion of related facilities. During 1998, transportation
volumes increased 59.5 Bcf, gas processed to remove CO2 increased 6.1 Bcf and gas processed to remove NGLs
increased 23.3 Bcf.

Outlook Pipelines & Processing will
continue to focus on investing in and developing projects in the
Midwest-to-Northeast region to be integrated with existing MCN
businesses. Pipelines & Processing existing investments that
are not within the target region will continue to be managed and
developed to maintain their value. Disposition of each
non-regional investment will be independently evaluated to
maximize shareholder value.

The Pipelines & Processing segment has advanced three
interstate pipeline projects located within the target region
that are expected to contribute to future operating results.
PNGTS, Vector Pipeline and Millennium Pipeline are designed to
transport Canadian and U.S. natural gas volumes into the
Northeast and Southeast U.S. markets. As previously discussed,
the 292-mile PNGTS project was completed in early 1999 and can
transport up to 360 MMcf per day. MCNs future operating
results are expected to be favorably impacted through the
generation of markets to utilize the projects significant
unused capacity. MCN has a 25% interest in the Vector Pipeline, a
 343-mile pipeline that is expected to transport up to 1 Bcf
 per day, and a 10.5% interest in the Millennium Pipeline, a
442-mile pipeline that will have the capacity to transport
700 MMcf per day. The Vector Pipeline began construction in
early 2000 and is scheduled to be placed in service by
November 2000. The Millennium Pipeline is subject to
regulatory approval and sufficient market development.

Pipelines & Processing has investments in certain joint
ventures where it is allocated income based on its share of the
ventures earnings but not less than a predetermined fixed
amount. Joint venture income recorded from these investments
through 1999 was based on the fixed amount. Under the joint
venture agreements, the fixed amount will be lowered or
eliminated in 2000.

In 1998, MCN advanced approximately $18 million of a $20 million
commitment to a developer of a fertilizer project in the United
Arab Emirates. The advance was structured as an interest-bearing
loan with the possibility of being converted into an equity
investment in the project. The original advance was due in
September 1999. In March 2000, MCN advanced the
remaining $2 million of its original commitment and restructured
the entire $20 million advance plus accrued interest by taking a
promissory note for $22.3 million and waiving its rights to
convert the advance to equity. The note is secured by the
projects assets and is due in September 2000.

In December 1999, MCN sold four of its coal fines plants to
DTE (Note 4a) in an arms-length transaction that is
independent of the merger. The sales price will depend on total
production performance of the four plants. DTE made an initial
$45 million payment in January 2000 that will be adjusted up
 to $152 million or down to zero based on the results of a
36-month production test period. Beginning in 2001, Pipelines
& Processing results are expected to be favorably affected by
 the recording of gains from the sale of the plants as increasing
 production levels are achieved.

37



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Pipelines & Processings future operating results will
be affected by projects acquired and sold (Note 4a) as well
as by the timing and extent of any divesting of projects that are
 not in the Midwest-to-Northeast region. Operating results will
also be affected by the level of gas volumes transported and
processed as well as by changes in gas processing margins,
methanol prices, and transportation and gathering rates.

Electric Poweroperating and joint venture results,
excluding unusual charges, decreased $3.1 million in 1999 and
increased $7.9 million in 1998.

The 1999 decline is primarily due to the sale of joint venture
interests in both international and domestic power projects,
specifically the Torrent Power Limited (TPL) venture and a
portion of the Ada Cogeneration facility. In August 1999,
MCN completed the sale of its 40% interest in TPL for
approximately $130 million, resulting in an immaterial gain. TPL
held minority interests in electric distribution companies and
power generation facilities in the state of Gujarat, India.
Earnings from TPL for all of 1999 were deferred due to the
pending sale. MCN sold a 50% interest in the 30 megawatt
(MW) Ada Cogeneration facility in early 1998. Through
December 1999, MCN continued to hold the remaining 50%
interest in the Ada project. Additionally, 1999 was impacted by
an uncollectible expense provision associated with the bankruptcy
 of a customer that owned a small cogeneration facility.

Partially offsetting the decline in Electric Powers 1999
earnings were increased contributions from the 1,370 MW Midland
Cogeneration Venture (MCV) facility and the 123 MW Michigan Power
 cogeneration facility. MCN acquired an additional 5% interest in
 the MCV partnership in June 1998, bringing its total
interest in the partnership to 23%. Additionally, 1999 earnings
from the MCV partnership include a favorable $2.1 million pre-tax
 adjustment for the resolution of a number of contract issues
with the electricity purchaser. Increased contributions from
MCNs 50%-owned Michigan Power cogeneration facility were
due to higher electricity capacity payments received under its
long-term power purchase agreement.



---

|                                                   |  |      |         |      |  |      |         |  |  |  |         | 
|-------------------------------------------------- |  | ---- | ------- | ---- |  | ---- | ------- |  |  |  | ------- | 
|                                                   |  | 1999 |         | 1998 |  | 1997
|                                                   |  |      |         |      |  |     
|Electric Power Statistics (thousands of MW hours)* |  |      |         |      |  |      |         |  |  |  |         | 
|                                                  
|                                                  
|                                                  
|                                                  
|Electricity Sales  Domestic                       |  |      | 2,755.8 |      |  |      | 2,516.7 |  |  |  | 1,842.6 | 
|                                                  
|                                                  
|                                                  
|                                                  
|Electricity Sales  International                  |  |      |        |      |  |      | 1,288.3 |  |  |  | .7      | 
|                                                   |  |      |         |      |  |      |         |  |  |  |         | 
|                                                   |  |      | 2,755.8 |      |  |      | 3,805.0 |  |  |  | 1,843.3 | 
|                                                   |  |      |         |      |  |      |         |  |  |  |         | 




|  |                                       
|- | --------------------------------------
|* | Includes MCNs share of joint ventures

The improvement in Electric Powers 1998 earnings reflects
contributions from TPL, MCV and the Michigan Power project. TPL
built, owns and operates a 655 MW dual-fuel facility in India
that began partial operations in December 1997, and became
fully operational in late 1998. MCN acquired an initial 18%
interest in MCV in mid-1997 and an additional 5% interest in MCV
in mid-1998. Improved earnings from the Michigan Power facility
were also due to a higher electricity sales rate.

38



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Outlook As a result of the pending merger with
 DTE, MCN has sold or has agreements to sell a significant
portion of its electric power investments (Note 4b). MCN expects
to realize a net gain from such sales. MCNs remaining
electric power investments that are not within the target region
will continue to be managed and developed to maintain their
value.

Energy Marketingoperating and joint venture loss
increased $7.8 million in 1999 and $1.3 million in 1998. The
increased 1999 loss primarily reflects higher gas storage and
transportation costs. The Washington 10 storage project, for
which MCN markets 100% of the 42 Bcf of storage capacity, was
completed and placed into operation in July 1999. Completion
 of this project brings Energy Marketings storage capacity
to 71 Bcf. Energy Marketing increased its firm transportation
capacity in 1999 when the 292-mile Portland Natural Gas
Transmission System was placed in service during the 1999 first
quarter. The storage capacity, coupled with firm transportation
capacity on interstate pipelines, enhances Energy
Marketings ability to offer reliable gas supply during peak
 winter months. The 1999 loss also reflects higher uncollectible
expenses and costs associated with the June 1999 dissolution
 of the DTE-CoEnergy joint venture.

Partially offsetting the increased 1999 loss were higher earnings
 from a significant increase in gas sales and exchange gas
delivery volumes. Under exchange gas contracts, Energy Marketing
accepts gas from customers or delivers gas to customers and the
gas is returned during a subsequent period. Gas sales and
exchange deliveries increased 131.9 Bcf during 1999. This
improvement was due in part to the April 1999 acquisition of
 two companies marketing operations that significantly
increased Energy Marketings level of sales to large
commercial and industrial customers in the Midwest.



---

|                                      |  |      |       |      |  |      |       |  |  |  |       | 
|------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                      |  | 1999 |       | 1998 |  | 1997
|                                      |  |      |       |      |  |     
|Energy Marketing Statistics (in Bcf)* |  |      |       |      |  |      |       |  |  |  |       | 
|                                     
|                                     
|                                     
|                                     
|Gas Sales                             |  |      | 585.7 |      |  |      | 454.7 |  |  |  | 343.7 | 
|                                     
|                                     
|                                     
|                                     
|Exchange Gas Deliveries               |  |      | 11.9  |      |  |      | 11.0  |  |  |  | 15.1  | 
|                                      |  |      |       |      |  |      |       |  |  |  |       | 
|                                      |  |      | 597.6 |      |  |      | 465.7 |  |  |  | 358.8 | 
|                                      |  |      |       |      |  |      |       |  |  |  |       | 




|  |                                       
|- | --------------------------------------
|* | Includes MCNs share of joint ventures

The increased 1998 loss is also due to higher gas storage and
transportation costs, partially offset by higher earnings from an
 increase in gas sales volumes. Energy Marketings total gas
 sales and exchange deliveries increased 106.9 Bcf during 1998.
Additionally, the earnings comparison was affected by the
inclusion of $2.2 million of contributions from Energy
Marketings 25% interest in a gas storage project that was
sold in December 1997.

Outlook MCN will focus on growing its Energy
Marketing segment through expansion of its coverage within
existing markets in the target region. MCNs abundant gas
storage and transportation capacity enhances its ability to
provide reliable and custom-tailored bundled services to
large-volume end users and utilities. This capacity, coupled with
 the synergies expected from integrating MCNs other
businesses, positions Energy Marketing to capitalize on
opportunities for expansion of its market base into the Northeast
 and Midwest United States and eastern Canada.

39



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Energy Marketing has an existing joint venture investment that
has developed markets which are not within the target region. MCN
 will continue to manage and develop this joint venture
investment to maintain its value. Disposition of the non-regional
 joint venture will be independently evaluated to maximize
shareholder value.

Exploration & Productionoperating and joint venture
income, excluding the unusual charges, decreased $14.3 million in
 1999 and $29.1 million in 1998. The 1999 decline reflects a
decrease in overall gas and oil production of 29.1 Bcf equivalent
 due primarily to the sale of MCNs Western and
Midcontinent/ Gulf Coast E&P properties in early and
mid-1999.

E&P results for 1999 were also impacted by an increase in
production-related expenses, which were partially offset by an
increase in the overall average gas and oil sales prices.
Production expenses increased $.14 per Mcf equivalent in 1999
reflecting the higher costs of operating the E&P properties
retained. The average sales prices increased $.10 per Mcf
equivalent in 1999 due to higher industry prices for both natural
 gas and oil. The impact of higher natural gas and oil sales
prices on E&P operating and joint venture income was
mitigated by hedging with swap and futures agreements, as
discussed in the Risk management strategy section
that follows.



---

|                                            |                                      |      |      |      |  |      |      |      |  |   |      |      | 
|------------------------------------------- | ------------------------------------ | ---- | ---- | ---- |  | ---- | ---- | ---- |  | - | ---- | ---- | 
|                                            |                                      | 1999 |      | 1998 |  | 1997
|                                            |                                      |      |      |      |  |     
|Exploration & Production Statistics         |                                      |      |      |      |  |      |      |      |  |   |      |     
|                                           
|                                           
|                                           
|                                           
|Gas and Oil Production (Bcf equivalent):    |                                      |      |      |      |  |      |      |      |  |   |      |     
|                                           
|                                           
|                                           
|                                           
|                                            | Michigan                             |      |      | 27.3 |  |      |      | 28.0 |  |   |      | 30.2 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Appalachia                           |      |      | 22.6 |  |      |      | 19.1 |  |   |      | 10.9 | 
|                                            |                                      |      |      |      |  |      |      |      |  |   |      |     
|                                            |                                      |      | 49.9 |      |  |      | 47.1 |      |  |   | 41.1 |     
|                                           
|                                           
|                                           
|                                           
|                                            | Western and Midcontinent/ Gulf Coast |      |      | 18.9 |  |      |      | 50.8 |  |   |      | 57.2 | 
|                                            |                                      |      |      |      |  |      |      |      |  |   |      |     
|                                            |                                      |      | 68.8 |      |  |      | 97.9 |      |  |   | 98.3 |     
|                                            |                                      |      |      |      |  |      |      |      |  |   |      |     
|Production Costs (per Mcf equivalent)       |                                      | $    | .95  |      |  | $    | .81  |      |  | $ | .70  |     
|                                            |                                      |      |      |      |  |      |      |      |  |   |      |     
|Average Selling Price (per Mcf equivalent)* |                                      | $    | 2.22 |      |  | $    | 2.12 |      |  | $ | 2.20 |     
|                                            |                                      |      |      |      |  |      |      |      |  |   |      |     




|  |                                                                                                     
|- | ----------------------------------------------------------------------------------------------------
|* | The average selling prices have been adjusted for
	amounts received or paid under hedging contracts.

The decline in 1998 earnings primarily reflects an increase in
production-related costs as well as a sharp decrease in average
oil sales prices, and is partially offset by an increase in
average gas sales prices. Production expenses increased $.11 per
Mcf equivalent in 1998, while the overall average sales prices
for gas and oil decreased $.08 per Mcf equivalent. Results for
1997 also include income from MCNs unconsolidated joint
venture that contributed $6.6 million of pre-tax gains from the
sale of undeveloped properties.

E&P operations have supplemented Diversified Energys
earnings through the generation of gas production tax credits,
primarily from production of coalbed methane and Antrim shale
gas. Tax credits were essentially zero in 1999 compared to $10.5
million in 1998 and $17.8 million in 1997. Gas production tax
credits were not recorded in 1999 as a result of the mid-1998
sale of Antrim tax credits and MCNs current net operating
loss tax position. The income from the sale of the tax credits is
 recorded as other income as the credits are generated.

40



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Outlook As a result of its revised strategic
direction, MCN sold its Western E&P properties in early 1999,
 its Midcontinent/ Gulf Coast E&P properties in mid-1999 and
its Appalachia E&P properties in December 1999. Accordingly,
gas and oil production in 2000 will be lower than in 1999. MCN
will retain and aggressively manage its natural gas producing
properties in Michigan. MCN will seek to optimize returns from
its Michigan properties by efficiently integrating production
with MCNs other businesses.

Risk management strategy MCN manages commodity
 price risk by utilizing futures, options and swap contracts to
more fully balance its portfolio of gas and oil supply and sales
agreements. MCNs Energy Marketing business coordinates all
of MCNs hedging activities to ensure compliance with risk
management policies that are periodically reviewed by MCNs
Board of Directors. Certain hedging gains or losses related to
gas and oil production are recorded by MCNs E&P
operations. Gains and losses on gas and oil production-related
hedging transactions that are not recorded by MCNs E&P
unit are recorded by Energy Marketing. In late 1998, MCN began
entering into offsetting positions for existing hedges of gas and
 oil production from properties that were sold in 1999 (Note
14b).

Corporate & Otheroperating and joint venture losses,
excluding restructuring charges, decreased $7.6 million in 1999
and increased $4.1 million in 1998. The 1999 improvement is due
primarily to adjustments necessary to reduce or eliminate
accruals for employee incentive awards that are based on
MCNs operating or stock-price performance. The 1999 results
 also reflect decreased administrative expenses associated with
corporate management activities. The Diversified Energy group was
 charged a smaller portion of such expenses in 1999, reflecting
its reduced percentage of MCN due to the asset sales. The
increase in operating and joint venture losses in 1998 were
attributable to an increase in corporate administrative expenses.

Other Income and Deductions

Other income and deductions increased $100.9 million in 1999 and
$24.9 million in 1998. The comparison was affected by unusual
charges in 1999 and 1998, as previously discussed. Both years
also reflect higher interest and dividend costs on increased debt
 and preferred equity balances required to finance capital
investments of $359.5 million in 1999 and $632.9 million in 1998.

Other income and deductions comparisons also were affected by
several gains from the sale of properties. In 1998, a $6.0
million pre-tax gain was recorded from the sale of certain gas
sales contracts and a $3.9 million pre-tax gain was recorded from
 the sale of a 50% interest in the 30 MW Ada Cogeneration
facility. Other income and deductions for 1997 included a $3.2
million pre-tax gain from the December 1997 sale of
Diversified Energys 25% interest in a gas storage project,
a $2.5 million pre-tax gain from the sale of pipeline assets and
a $2.4 million pre-tax gain related to the sale of an interest in
 a Pipelines & Processing partnership.

Income Taxes

Income taxes increased $151.5 million in 1999 and decreased
$216.4 million in 1998. Income taxes were impacted by variations
in pre-tax earnings. Income tax comparisons were also affected by
 varying levels of gas production tax credits and stock-related
tax benefits. Additionally, 1999 reflects

41



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

taxes on approximately $3.6 million of undistributed earnings of
foreign subsidiaries generated in 1998. There was no provision
for federal, state or foreign taxes in 1998 related to foreign
undistributed income as it was MCNs intent to permanently
reinvest the earnings under its prior corporate strategy.

Gas Distribution




|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |         |  
|------------------------------------ | ----------------------------------------------- | ---- | ------- | ----- | - | ---- | ------- | ----- | - | - | ------- | ------- | -
|                                     |                                                 | 1999 |         | 1998  |   | 1997
|(in Millions)                        |                                                 |      |         |       |   |     
|Gas Distribution Operations          |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Operating Revenues*                  |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Gas sales                                       |      | $       | 924.6 |   |      | $       | 838.9 |   |   | $       | 1,080.1 |  
|                                    
|                                    
|                                    
|                                    
|                                     | End user transportation                         |      |         | 103.9 |   |      |         | 82.3  |   |   |         | 84.7    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Intermediate transportation                     |      |         | 57.8  |   |      |         | 63.2  |   |   |         | 55.2    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                           |      |         | 84.3  |   |      |         | 67.4  |   |   |         | 51.3    |  
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                     |                                                 |      | 1,170.6 |       |   |      | 1,051.8 |       |   |   | 1,271.3 |        
|                                    
|                                    
|                                    
|                                    
|Cost of Sales                        |                                                 |      | 507.3   |       |   |      | 462.1   |       |   |   | 642.0   |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Gross Margin                         |                                                 |      | 663.3   |       |   |      | 589.7   |       |   |   | 629.3   |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Other Operating Expenses*            |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Operation and maintenance                       |      |         | 278.4 |   |      |         | 256.6 |   |   |         | 286.7   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Depreciation and depletion                      |      |         | 100.1 |   |      |         | 93.8  |   |   |         | 104.4   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Property and other taxes                        |      |         | 45.9  |   |      |         | 56.0  |   |   |         | 61.3    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Property write-down (Note 3f)                   |      |         |      |   |      |         | 24.8  |   |   |         |        |  
|                                    
|                                    
|                                    
|                                    
|                                     | Merger costs (Note 2)                           |      |         | 25.8  |   |      |         |      |   |   |         |        |  
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                     |                                                 |      | 450.2   |       |   |      | 431.2   |       |   |   | 452.4   |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Operating Income                     |                                                 |      | 213.1   |       |   |      | 158.5   |       |   |   | 176.9   |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Equity in Earnings of Joint Ventures |                                                 |      | 2.0     |       |   |      | 1.0     |       |   |   | 2.5     |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Other Income and (Deductions)*       |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest income                                 |      |         | 2.3   |   |      |         | 5.7   |   |   |         | 4.7     |  
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense                                |      |         | (56.5 | ) |      |         | (57.5 | ) |   |         | (54.5   | )
|                                    
|                                    
|                                    
|                                    
|                                     | Investment loss (Note 3f)                       |      |         |      |   |      |         | (8.5  | ) |   |         |        |  
|                                    
|                                    
|                                    
|                                    
|                                     | Minority interest                               |      |         | (1.0  | ) |      |         | 5.7   |   |   |         | (1.9    | )
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                           |      |         | (1.4  | ) |      |         | (.2   | ) |   |         | .5      |  
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                     |                                                 |      | (56.6   | )     |   |      | (54.8   | )     |   |   | (51.2   | )      
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|Income Before Income Taxes           |                                                 |      | 158.5   |       |   |      | 104.7   |       |   |   | 128.2   |        
|                                    
|                                    
|                                    
|                                    
|Income Tax Provision                 |                                                 |      | 55.1    |       |   |      | 33.0    |       |   |   | 47.1    |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                    
|Net Income                           |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Before unusual items                            |      |         | 120.2 |   |      |         | 88.4  |   |   |         | 81.1    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual charges and merger costs (Notes 2 & 3f) |      |         | (16.8 | ) |      |         | (16.7 | ) |   |         |        |  
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        
|                                     |                                                 | $    | 103.4   |       |   | $    | 71.7    |       |   | $ | 81.1    |        
|                                     |                                                 |      |         |       |   |      |         |       |   |   |         |        



---

|  |                                   
|- | ----------------------------------
|* | Includes intercompany transactions

Record year results reflect earnings from new gas sales
program and more favorable weather  Gas
Distribution had earnings for 1999 of $103.4 million, an increase
 of $31.7 million from 1998 earnings

42



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

of $71.7 million. The comparison was impacted by unusual charges
and merger costs as previously discussed. The 1999 earnings
improvement reflects contributions from the new gas sales program
 that began in January 1999 as well as the impact of more
favorable weather. The gas sales program allowed Gas Distribution
 to continue its record of solid financial performance producing
returns on equity of 14.5% in 1999, 11.0% in 1998 and 13.2% in
1997.

Excluding the unusual charges, Gas Distribution had 1998 earnings
 of $88.4 million, an improvement of $7.3 million over 1997
earnings of $81.1 million. The earnings comparison was impacted
by variations in weather and cost-saving initiatives resulting in
 significantly lower operating costs.

Gross Margin

Gross margin (operating revenues less cost of sales) increased
$73.6 million in 1999 and decreased $39.6 million in 1998. The
increase in 1999 is due primarily to margins generated under
MichCons new three-year gas sales program, which is part of
 its Regulatory Reform Plan (Note 7b). Under the gas sales
program that began in January 1999, MichCons gas sales
 rates include a gas commodity component that is fixed at $2.95
per Mcf. As part of its gas acquisition strategy, MichCon has
entered into fixed-price contracts at costs below $2.95 per Mcf,
for a substantial portion of its expected gas supply requirements
 through 2001. This strategy is likely to continue producing
favorable margins. However, margins are expected to be lower in
future years as MichCons fixed-price supplies in 2000 and
2001 are at prices higher than those paid in 1999. Additionally,
margins will be impacted if additional customers choose to
purchase their gas from other suppliers under MichCons
experimental three-year customer choice program.

The gross margin comparisons were also affected by changes in gas
 sales and end user transportation deliveries due primarily to
variations in weather. Additionally, gross margins in 1999 and
1998 reflect fluctuations in intermediate transportation revenues
 as well as revenues from the continued growth in other
gas-related services.



---

|                                              |                            |      |      |       |   |      |       |       |   |  |    |     | 
|--------------------------------------------- | -------------------------- | ---- | ---- | ----- | - | ---- | ----- | ----- | - |  | -- | --- | 
|                                              |                            | 1999 |      | 1998  |   | 1997
|                                              |                            |      |      |       |   |     
|Effect of Weather on Gas Markets and Earnings |                            |      |      |       |   |      |       |       |   |  |    |    
|                                             
|                                             
|                                             
|                                             
|Percentage Colder (Warmer) Than Normal        |                            |      | (9.0 | )%    |   |      | (19.3 | )%    |   |  | .8 | %  
|Increase (Decrease) From Normal in            |                            |      |      |       |   |      |       |       |   |  |    |    
|                                             
|                                             
|                                             
|                                             
|                                              | Gas markets (in Bcf)       |      |      | (18.7 | ) |      |       | (40.3 | ) |  |    | .6  | 
|                                             
|                                             
|                                             
|                                             
|                                              | Net income (in Millions)   |      | $    | (18.6 | ) |      | $     | (35.3 | ) |  | $  | .5  | 
|                                             
|                                             
|                                             
|                                             
|                                              | Diluted earnings per share |      | $    | (.22  | ) |      | $     | (.45  | ) |  | $  | .01 | 




Gas sales and end user transportationrevenues in total
increased $107.3 million in 1999, and decreased $243.6
million in 1998. Revenues were affected by fluctuations in gas
sales and end user transportation deliveries that increased
21.3 Bcf in 1999, and decreased 41.7 Bcf in 1998. The
variations in gas sales and end user transportation deliveries
were due primarily to weather, which was 10.3% colder in 1999 and
 20.1% warmer in 1998 compared to the previous years.

43



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Revenues were also impacted by variations in the cost of the gas
commodity component of gas sales rates. As previously discussed,
this gas commodity component was fixed under MichCons new
gas sales program at $2.95 per Mcf beginning in
January 1999. Prior to 1999, MichCons sales rates were
 set to recover all of its reasonably and prudently incurred gas
costs. Therefore, the effect of any fluctuations in cost of gas
sold prior to 1999 was substantially offset by a change in gas
sales revenues. The gas commodity component of MichCons
sales rates increased $.24 per Mcf (9%) in 1999 and decreased
$.40 per Mcf (13%) in 1998.




|                                      |  |      |       |      |  |      |       |  |  |  |       | 
|------------------------------------- |  | ---- | ----- | ---- |  | ---- | ----- |  |  |  | ----- | 
|                                      |  | 1999 |       | 1998 |  | 1997
|                                      |  |      |       |      |  |     
|Gas Distribution Statistics (in Bcf)* |  |      |       |      |  |      |       |  |  |  |       | 
|                                     
|                                     
|                                     
|                                     
|Gas Sales                             |  |      | 181.8 |      |  |      | 172.2 |  |  |  | 209.1 | 
|                                     
|                                     
|                                     
|                                     
|End User Transportation               |  |      | 152.0 |      |  |      | 140.3 |  |  |  | 145.1 | 
|                                      |  |      |       |      |  |      |       |  |  |  |       | 
|                                      |  |      | 333.8 |      |  |      | 312.5 |  |  |  | 354.2 | 
|                                     
|                                     
|                                     
|                                     
|                                     
|Intermediate Transportation           |  |      | 531.9 |      |  |      | 537.5 |  |  |  | 586.5 | 
|                                      |  |      |       |      |  |      |       |  |  |  |       | 
|                                      |  |      | 865.7 |      |  |      | 850.0 |  |  |  | 940.7 | 
|                                      |  |      |       |      |  |      |       |  |  |  |       | 




|  |                                   
|- | ----------------------------------
|* | Includes intercompany transactions

Intermediate transportationrevenues decreased $5.4
million in 1999, and increased $8.0 million in 1998. The 1999
decrease is due to customers shifting volumes from a higher rate
to a lower rate transportation route, lower fees generated from
tracking the transfer of gas title on MichCons
transportation system, as well as lower off-system volumes
transported of 5.6 Bcf. The increase in intermediate
transportation revenues in 1998 is due in part to increased fees
from tracking the transfer of gas title. Although intermediate
transportation revenues increased in 1998, volumes delivered
decreased 49.0 Bcf, reflecting lower off-system demand
caused by the warmer weather and lower volumes transported for
fixed-fee customers. Transportation volumes for fixed-fee
customers may fluctuate significantly, however revenues from such
 customers are not affected. While intermediate transportation
volumes are a significant part of total markets, profit margins
on this service are considerably less than margins on gas sales
or for end user transportation services.

Other operating revenuesincreased $16.9 million in 1999
and $16.1 million in 1998. The improvement in both periods is due
 to an increase in late payment fees, appliance maintenance
services and other gas-related services. Additionally, 1999
reflects a full year of revenues from the acquisition of three
heating and cooling firms in October 1998. The comparisons
are also impacted by unfavorable adjustments in 1997 related to
the discontinuance of MichCons energy conservation
programs.

Cost of Sales

Cost of sales is affected by variations in gas sales volumes and
the cost of purchased gas as well as related transportation
costs. Under the Gas Cost Recovery (GCR) mechanism that was
in effect through 1998 (Note 7d), MichCons sales rates
 were set to recover all of its reasonably and prudently incurred
 gas costs. Therefore, fluctuations in cost of gas sold had
little effect on gross margins. Under MichCons new gas
sales program, the gas commodity component of its sales rates

44



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

is fixed. Accordingly, beginning in 1999, changes in cost of gas
sold directly impact gross margins and earnings.

Cost of sales increased by $45.2 million in 1999 and decreased by
 $179.9 million in 1998, primarily as a result of varying
weather-driven gas sales volumes. The increase in 1999
attributable to weather was partially offset by a reduction in
gas sales volumes as a result of customers who have chosen to
purchase their gas from other suppliers under MichCons
customer choice program. As previously discussed, MichCon retains
 margins from these customers by continuing to transport and
deliver the gas to the customers premises.

Cost of sales was also impacted by average prices paid for gas
volumes sold, which increased $.02 (1%) per Mcf in 1999, and
decreased $.40 (13%) per Mcf in 1998. Additionally, the
comparison reflects cost of sales associated with the operations
of the three heating and cooling companies acquired in
October 1998.

Other Operating Expenses

Operation and maintenanceexpenses increased $21.8 million
 in 1999 and declined $30.1 million in 1998. The increase in 1999
 is attributable to additional computer system support costs
associated with MichCons new customer information system
and higher injuries and damages costs. Operation and maintenance
expenses in 1998 benefited from an interstate pipeline company
refund. Additionally, both periods reflect managements
continuing efforts to control operating costs. More specifically,
 1999 and 1998 reflect lower employee benefit costs, primarily
pension and retiree healthcare costs, as well as lower
uncollectible gas accounts expense.

Gas Distribution has streamlined its organizational structure
over the past several years while increasing its customer base
and expanding energy services to customers. MichCon implemented
an early retirement program in early 1998 that reduced its net
workforce by approximately 6%. The cost of the program and the
related savings were largely offsetting in 1998, but the program
contributed to lower operating costs in 1999. Since 1996, the
number of employees has declined by approximately 350 or 11%,
while the number of customers has increased more than 30,000 or
3%.

Gas Distributions uncollectible gas accounts expense
declined $1.5 million in 1999 and $8.7 million in 1998,
 reflecting the impact of weather on accounts receivable
balances, a more aggressive collection program, as well as the
continuation of home heating assistance funding obtained by
low-income customers.

Gas Distributions uncollectible gas accounts expense is
directly affected by the level of government-funded heating
assistance its qualifying customers receive. The State of
Michigan provides this assistance in the form of Michigan Home
Heating Credits that are funded almost exclusively by the Federal
 Low-Income Home Energy Assistance Program (LIHEAP). Congress
approved funding for both the 1998 and 1999 fiscal years at $1.1
billion, compared to funding of $1.0 billion for the 1997 fiscal
year. The State of Michigans share of LIHEAP funds was
increased from $54 million in fiscal year 1998 to $59 million in
1999. Gas Distribution received $12.6 million of these funds in
1999, $.8 million less than in 1998. Home Heating Credits
assisted 69,000 Gas Distribution customers in 1999, compared to
73,000 in 1998. During 1999, President Clinton signed an
appropriations package that funds LIHEAP at $1.1 billion for
fiscal year ending in September 2000.

45



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Any future change in LIHEAP funding may impact Gas
Distributions uncollectible gas accounts expense.

Depreciation and depletion increased by $6.3 million in
1999 and decreased by $10.6 million in 1998. The increase in 1999
 reflects higher plant balances resulting from capital
expenditures of $137 million in 1999 and $158 million in 1998.
The decrease in 1998 resulted from lower depreciation rates for
utility property, plant and equipment that became effective in
January 1998. Depreciation on higher plant balances
partially offset the 1998 rate decrease.

Property and other taxes decreased $10.1 million in 1999
and $5.3 million in 1998. The decreases for both 1999 and 1998
are attributable to lower property taxes resulting from a 1998
change in the calculation of the value of personal property
subject to taxation by local governments. MichCon has pending tax
 appeals with various local governments to recover excess
payments made in 1996 and 1997 based on the revised calculation.
This calculation change, coupled with the favorable impact of new
 valuation tables approved by the Michigan State Tax Commission
(STC) in November 1999, are expected to lower Gas
Distributions personal property taxes by approximately $15
million annually beginning in 2000. Several local governments
have taken legal action against the State of Michigan to prevent
the STC from implementing the new valuation tables
(Note 13a). The decrease in property and other taxes in 1998
 was also due to lower Michigan Single Business Taxes resulting
from a decrease in taxable income.

Property write-down of $24.8 million in 1998 reflects the
impairment of certain gas gathering properties in northern
Michigan (Note 3f).

Merger costs of $25.8 million in 1999 reflect legal,
consulting, accounting, employee benefit and other expenses
associated with the pending merger between MCN and DTE Energy
Company (Note 2).

Equity in Earnings of Joint Ventures

Earnings from joint ventures increased $1.0 million in 1999 and
decreased $1.5 million in 1998. The comparison reflects increased
 losses in 1998 from Gas Distributions 47.5% interest in a
Missouri gas distribution company.

Other Income and Deductions

Other income and deductions increased $1.8 million in 1999 and
$3.6 million in 1998. The change in 1999 is attributable to lower
 interest income resulting from the repayment of funds loaned to
MCN. The other income and deductions comparisons were also
affected by a 1998 unusual charge to write down the investment in
 a small natural-gas distribution company located in Missouri.
Additionally, 1998 includes a change in minority interest due to
the joint venture partners share of the write-down of
certain gas gathering properties (Note 3f).

46



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Income Taxes

Income taxes increased $22.1 million in 1999 and decreased $14.1
million in 1998. Income tax comparisons were affected by
variations in pre-tax earnings and tax credits. Income taxes in
1999 include amounts for the favorable resolution of prior
years tax issues.

Outlook

Gas Distributions strategy is to expand its role as the
preferred provider of natural gas and high-value energy services
within Michigan. Accordingly, Gas Distributions objectives
are to grow its revenues and control its costs in order to
deliver strong shareholder returns and provide customers
high-quality service at competitive prices. Modest revenue growth
 will be achieved through initiatives to expand Gas
Distributions 900 Bcf of gas markets, its 1.2 million
residential, commercial and industrial customer base, as well as
by providing new energy-related services that capitalize on its
expertise, capabilities and efficient systems. Revenues will also
 be generated from the sale, installation and servicing of
residential and commercial heating and cooling systems.
Management is continually assessing ways to improve cost
competitiveness. Among other cost saving initiatives, MichCon has
 reduced its net workforce each year since 1992.

The challenges and opportunities resulting from increased
competition in the natural gas industry have been a catalyst for
MPSC action in the development of major reforms in utility
regulation aimed at giving all customers added choices and more
price certainty. The overall package of regulatory changes
connected with the gas industry restructuring is expected to
generate additional revenue and cost savings opportunities. Gas
Distribution is positioning itself to respond to changes in
regulation and increased competition by reducing its cost of
operations while maintaining a safe and reliable system for
customers.

Gas Distribution has begun and plans to continue capitalizing on
opportunities resulting from the gas industry restructuring.
MichCon has implemented its Regulatory Reform Plan, which
includes a comprehensive experimental three-year customer choice
program designed to offer all sales customers added choices and
greater price certainty. The customer choice program began in
April 1999, and approximately 70,000 customers chose to
purchase natural gas from suppliers other than MichCon. Year two
and year three of the program begin April 1 of 2000 and 2001,
respectively. The number of customers allowed to participate in
the program is limited to 150,000 in 2000 and 225,000 in 2001.
There is also a volume limitation on commercial and industrial
participants of 20 Bcf in 2000 and 30 Bcf in 2001. MichCon will
continue to transport and deliver the gas to the customers
premises at prices that generate favorable margins. However,
these margins will be lower than those generated in 1999 from the
 sale of gas to such customers.

The Regulatory Reform Plan also suspended the GCR mechanism for
customers who continue to purchase gas from MichCon, and fixed
the gas commodity component of MichCons sales rates at
$2.95 per Mcf for the three-year period that began in
January 1999. The suspension of the GCR mechanism allows
MichCon to profit from its ability to purchase gas at less than
$2.95 per Mcf. Prior to 1999, MichCon did not generate earnings
on the gas commodity portion of its operations. As part of its
gas acquisition strategy, MichCon has entered into fixed-price
contracts at costs below $2.95 per Mcf for a substantial portion
of its expected gas supply requirements through 2001. This

47



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

strategy produced favorable margins in 1999 and is likely to
continue producing favorable margins through 2001. However,
margins are expected to be lower in future years as
MichCons fixed-price supplies in 2000 and 2001 are at
prices higher than those paid in 1999. The level of margins
generated from selling gas will also be affected by the number of
 customers who ultimately choose to purchase gas from suppliers
other than MichCon under the three-year customer choice program.

The Plan also encompasses an income sharing mechanism that allows
 customers to share in profits when actual returns on equity from
 utility operations exceed predetermined thresholds. Although the
 Plan increases MichCons risk associated with generating
margins that cover its gas costs, management believes this Plan
will continue to have a favorable impact on earnings.

The State of Michigan is continuing its initiatives designed to
give all of Michigans natural gas customers added choices
and the opportunity to benefit from lower gas costs resulting
from competition. Natural gas choice legislation is before the
Michigan legislature, and if approved, would: (1) give any
qualified gas supplier the opportunity to compete; (2) phase
 in gas choice for all Michigan customers over three to five
years; and (3) replace the regulatory gas commodity pricing
process with one based on market prices that allows all customers
 to get the benefits of market-based pricing whether they elect
to stay with their utility or choose another gas commodity
supplier. Natural gas choice legislation could become effective
prior to the end of MichCons three-year customer choice
program that ends in March 2002, and therefore accelerate
the transition to a competitive natural gas market.

As described in Note 7a to the consolidated financial
statements, Gas Distribution complies with the provisions of
Statement of Financial Accounting Standards
(SFAS) No. 71, Accounting for the Effects of
Certain Types of Regulation. Future regulatory changes or
changes in the competitive environment could result in Gas
Distribution discontinuing the application of SFAS No. 71
for all or part of its business and would require the write-off
of the portion of any regulatory asset or liability that was no
longer probable of recovery or refund. If Gas Distribution were
to discontinue application of SFAS No. 71 for all of its
operations as of December 31, 1999, it would have an
extraordinary non-cash increase to net income of approximately
$57.9 million. Factors that could give rise to the discontinuance
 of SFAS No. 71 include: (1) increasing competition
that restricts Gas Distributions ability to establish
prices to recover specific costs, and (2) a significant
change in the manner in which rates are set by regulators from
cost-based regulation to another form of regulation. Based on a
current evaluation of the various factors and conditions that are
 expected to impact future regulation, management believes
currently available facts support the continued application of
SFAS No. 71.

Environmental Matters

Former manufactured gas plant sites 
Prior to the construction of major natural gas pipelines, gas for
 heating and other uses was manufactured from processes involving
 coal, coke or oil. MCN owns, or previously owned, 17 such former
 manufactured gas plant (MGP) sites.

During the mid-1980s, MCN conducted preliminary environmental
investigations at former MGP sites, and some contamination
related to the by-products of gas manufacturing was discovered at
 each site. The existence of these sites and the results of the
environmental investigations have been

48



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

reported to the Michigan Department of Environmental Quality
(MDEQ). None of these former MGP sites is on the National
Priorities List prepared by the U.S. Environmental Protection
Agency (EPA).

MCN is involved in an administrative proceeding before the EPA
regarding one of the former MGP sites. MCN has executed an order
with the EPA, pursuant to which MCN is legally obligated to
investigate and remediate the MGP site. MCN is remediating five
of the former MGP sites and conducting more extensive
investigations at six other former MGP sites. In 1998, MCN
received state closure of one of the former MGP sites.
Additionally, the MDEQ has determined with respect to one other
former MGP site that MCN is not a responsible party for the
purpose of assessing remediation expenditures. MCN and the MDEQ
are in discussions on whether MCN is a responsible party for one
other former MGP site.

In 1984, MCN established an $11.7 million reserve for
environmental investigation and remediation. During 1993, MichCon
 received MPSC approval of a cost deferral and rate recovery
mechanism for investigation and remediation costs incurred at
former MGP sites in excess of this reserve.

MCN employed outside consultants to evaluate remediation
alternatives for these sites, to assist in estimating its
potential liabilities and to review its archived insurance
policies. The findings of these investigations indicate that the
estimated total expenditures for investigation and remediation
activities for these sites could range from $30 million to $170
million based on undiscounted 1995 costs. As a result of these
studies, MCN accrued an additional liability and a corresponding
regulatory asset of $35 million during 1995.

MCN notified more than 50 current and former insurance carriers
of the environmental conditions at these former MGP sites. MCN
concluded settlement negotiations with certain carriers in 1996
and 1997 and has received payments from several carriers. In
October 1997, MCN filed suit against major non-settling
carriers seeking recovery of incurred costs and a declaratory
judgment of the carriers liability for future costs of
environmental investigation and remediation costs at former MGP
sites. A settlement was reached with a number of carriers with a
portion of the payment received in February 2000 and the
remaining portion expected by mid-2000. MCN is continuing
negotiations with the two remaining insurance carriers.

During 1999, 1998, and 1997, MCN spent $.7 million, $1.6 million
and $.8 million, respectively, investigating and remediating
these former MGP sites. At December 31, 1999, the reserve
balance is $34.4 million, of which $6.3 million is classified as
current. Any significant change in assumptions, such as
remediation techniques, nature and extent of contamination and
regulatory requirements, could impact the estimate of remedial
action costs for the sites and, therefore, have an effect on
MCNs financial position and cash flows. However, management
 believes that insurance coverage and the cost deferral and rate
recovery mechanism approved by the MPSC will prevent
environmental costs from having a material adverse impact on
MCNs results of operations.

Formerly owned storage field In 1998,
MichCon received written notification from ANR Pipeline Company
(ANR) alleging that MichCon has responsibility for a portion of
the costs associated with responding to environmental conditions
present at a natural gas storage field in Michigan currently
owned and operated by an affiliate of ANR. At least some portion
of the natural gas storage field was formerly-owned by MichCon.
MichCon is evaluating ANRs allegations to determine whether

49



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

and to what extent, if any, it may have legal responsibility for
these costs. Management does not believe this matter will have a
material adverse impact on MCNs financial statements.

CAPITAL RESOURCES AND LIQUIDITY



---

|                                                     |                      |      |      |        |   |      |       |        |   |   |     |        |  
|---------------------------------------------------- | -------------------- | ---- | ---- | ------ | - | ---- | ----- | ------ | - | - | --- | ------ | -
|                                                     |                      | 1999 |      | 1998   |   | 1997
|                                                     |                      |      |      |        |   |     
|Cash and Cash Equivalents(in Millions)               |                      |      |      |        |   |      |       |        |   |   |     |       
|Cash Flow Provided From (Used For)                   |                      |      |      |        |   |      |       |        |   |   |     |       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Operating activities |      | $    | 130.3  |   |      | $     | 152.7  |   |   | $   | 343.4  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Financing activities |      |      | (154.9 | ) |      |       | 497.8  |   |   |     | 522.8  |  
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investing activities |      |      | 66.9   |   |      |       | (673.0 | ) |   |     | (857.2 | )
|                                                     |                      |      |      |        |   |      |       |        |   |   |     |       
|Net Increase (Decrease) in Cash and Cash Equivalents |                      | $    | 42.3 |        |   | $    | (22.5 | )      |   | $ | 9.0 |       
|                                                     |                      |      |      |        |   |      |       |        |   |   |     |       



---

Operating Activities

MCNs cash flow from operating activities decreased $22.4
million in 1999 and $190.7 million in 1998. The decreases during
1999 and 1998 were due primarily to higher working capital
requirements and variations in earnings, after adjusting for
noncash items (depreciation, unusual charges and deferred taxes).

Financing Activities

MCNs cash flow from financing activities decreased $652.7
million in 1999 and $25.0 million in 1998. The decrease in both
years reflects lower debt and equity issuances in total, net of
debt repayments, as a result of lower capital expenditures and
acquisitions.

MCN typically relies on commercial paper and bank borrowings to
finance capital expenditures on a temporary basis until paid down
 with the proceeds from the issuance of more permanent capital,
such as long-term debt, preferred securities and common stock.
However, MCN will rely more on short-term financing and less on
permanent capital issuances during 2000. Proceeds from completing
 the sale of non-strategic assets in 2000 will be used to repay
commercial paper and bank borrowings. A summary of MCNs
significant financing activities during the 1997  1999
 period follows.

MCNs 5,865,000 shares of Preferred Redeemable Increased
Dividend Equity Securities (Enhanced PRIDES) matured in
April 1999. Each security represented a contract to purchase
 one share of MCN common stock. Upon conversion of the Enhanced
PRIDES, MCN received cash proceeds totaling approximately $135.0
million. The proceeds were used to repay a $130.0 million
medium-term note of Diversified Energy that came due in
May 1999.

50



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

In late 1999, MCNs $150 million revolving credit agreement
expired. MCN effectively replaced this agreement by entering into
 a $290 million revolving credit agreement that expires in
July 2000. Borrowings under the credit agreement totaled
$200.0 million at December 31, 1999 and were used to repay
debt and redeem $100 million of Single Point Remarketed Reset
Capital Securities (SPRRCS) in October 1999. The credit
 agreement will be used for general corporate purposes.

In 1998, MCN issued $100 million of preferred securities and
borrowed $260 million under a one-year term loan (Notes 9
and 10). Proceeds were used to reduce commercial paper, to fund
capital investments by Diversified Energy and for general
corporate purposes. MCN repaid the term loan in 1999 with
proceeds from the sale of its E&P properties.

In 1997, MCN sold 9,775,000 shares of common stock in a public
offering, generating net proceeds of $276.6 million
(Note 11a). In 1997, MCN issued $100 million of Private
Institutional Trust Securities (PRINTS) and $100 million of
SPRRCS (Note 10a). In 1997, MCN also issued 2,645,000 FELINE
 PRIDES, generating gross proceeds of $132.3 million
(Note 10a). The proceeds from these issuances were invested
by MCN in its Diversified Energy group and were used to reduce
short-term debt incurred to fund capital investments.

During 1998, MCN retired the PRINTS early because it determined
other forms of financing provide greater flexibility.

Prior to mid-February 1999, MCN traditionally issued new
shares of common stock pursuant to its Direct Stock Purchase and
Dividend Reinvestment Plan and various employee benefit plans.
During the January 1997 to February 1999 period, MCN
issued 2,422,000 shares and generated $39.2 million from common
stock issuances under these plans. Beginning in
mid-February 1999, shares issued under these plans are being
 acquired by MCN through open-market purchases.

As of December 1999, MCN had an outstanding shelf
registration with approximately $835.9 million remaining to be
issued in the form of debt or equity securities.

51



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

The following table sets forth the ratings as of
December 31, 1999 for securities issued by MCN and its
subsidiaries:




|        |                      |          |  |         |  |        |  |       |  |  |  |      |  |  |  |     | 
|------- | -------------------- | -------- |  | ------- |  | ------ |  | ----- |  |  |  | ---- |  |  |  | --- | 
|        |                      | Standard |  |         |  | Duff & |  |      
|        |                      | & Poors |  | Moodys |  | Phelps |  | Fitch
|        |                      |          |  |         |  |        |  |      
|MCN     |                      |          |  |         |  |        |  |       |  |  |  |      |  |  |  |    
|       
|       
|       
|       
|        | FELINE PRIDES        |          |  | BBB-    |  |        |  | ba1   |  |  |  | BBB  |  |  |  | BBB | 
|       
|       
|       
|       
|        | Preferred securities |          |  | BBB-    |  |        |  | ba1   |  |  |  | BBB  |  |  |  | BBB | 
|MCNEE   |                      |          |  |         |  |        |  |       |  |  |  |      |  |  |  |    
|       
|       
|       
|       
|        | Commercial paper*    |          |  | A2      |  |        |  | P3    |  |  |  | D2   |  |  |  | F2  | 
|       
|       
|       
|       
|        | Medium-term notes*   |          |  | BBB     |  |        |  | Baa3  |  |  |  | BBB+ |  |  |  | BBB | 
|MichCon |                      |          |  |         |  |        |  |       |  |  |  |      |  |  |  |    
|       
|       
|       
|       
|        | Commercial paper     |          |  | A2      |  |        |  | P1    |  |  |  | D1   |  |  |  | F1  | 
|       
|       
|       
|       
|        | First mortgage bonds |          |  | A-      |  |        |  | A2    |  |  |  | A+   |  |  |  | A   | 
|       
|       
|       
|       
|        | Senior notes**       |          |  | AAA     |  |        |  | Aaa   |  |  |  |     |  |  |  | AAA | 




|  |                                       
|- | --------------------------------------
|* | Ratings based on MCN support agreement

|   |                                                                             
|-- | ----------------------------------------------------------------------------
|** | Ratings based on an insurance policy provided by
	MBIA Insurance Corporation

Diversified Energy

The Diversified Energy group maintains credit lines that allow
for borrowings of up to $200 million under a 364-day revolving
credit facility and up to $200 million under a three-year
revolving credit facility. These facilities support Diversified
Energys commercial paper program, which is used to finance
capital investments and working capital requirements, as well as,
 support letters of credit issued by financing institutions in
favor of Diversified Energy businesses. The 364-day facility
expires in July 2000 and the three-year facility expires in
July 2001. At December 31, 1999, commercial paper and
bank borrowings totaling $352.4 million were outstanding under
the Diversified Energy credit facilities.

MCN received approximately $295 million in 1999 from the sale of
various non-Michigan E&P properties. MCN also received
approximately $130 million in 1999 from the sale of its interest
in TPL. Proceeds from these sales were used to repay outstanding
debt at the MCN Corporate and Diversified Energy levels. Proceeds
 from the sale of additional non-strategic assets are expected by
 mid-2000 and will be used to repay outstanding borrowings and
for general corporate purposes.

MCN Energy Enterprises Inc. (MCNEE) repaid $210 million of
medium-term notes that came due in 1999.

In 1998, Diversified Energy issued remarketable debt securities
totaling $300 million (Note 9). Proceeds from these
issuances were used to reduce short-term debt incurred by the
Diversified Energy group to fund capital investments and for
general corporate purposes.

During 1998, a subsidiary of MCNEE retired early a $100
million five-year term loan because it determined that other
forms of debt financing provide greater flexibility and lower
costs.

52



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

In 1997, MCNEE repaid $30 million of senior debt on its stated
maturity date and issued $150 million of medium-term notes, using
 the proceeds to repay short-term debt and for general corporate
purposes.

As of December 1999, MCNEE had an outstanding shelf
registration with $620 million remaining to be issued in the form
 of debt securities.

Gas Distribution

Gas Distribution maintains a relatively consistent amount of cash
 and cash equivalents through the use of short-term borrowings.
Short-term borrowings are normally reduced in the first part of
each year as gas inventories are depleted and funds are received
from winter heating sales. During the latter part of each year,
Gas Distributions short-term borrowings normally increase
as funds are used to finance increases in gas inventories and
customer accounts receivable. To meet its seasonal short-term
borrowing needs, Gas Distribution normally issues commercial
paper that is backed by credit lines with several banks. MichCon
has established credit lines to allow for borrowings of up to
$150 million under a 364-day revolving credit facility, and up to
 $150 million under a three-year revolving credit facility. The
364-day facility expires in July 2000, and the three-year
facility expires in July 2001. At December 31, 1999,
commercial paper of $235.9 million was outstanding under this
program.

During 1999, MichCon issued $110 million of senior secured notes
(Note 9). Proceeds from the issuances were used to refinance
 long-term debt, short-term obligations and for general corporate
 purposes. MichCon also repaid $68 million of first mortgage
bonds during 1999.

During 1998, MichCon issued $150 million of remarketable debt
securities (Note 9). Proceeds from these issuances were used
 to retire first mortgage bonds, fund capital expenditures and
for general corporate purposes. Also during 1998, MichCon repaid
$109.7 million of first mortgage bonds.

During 1997, MichCon issued $85 million of first mortgage bonds.
The funds from this issuance were used to retire first mortgage
bonds, fund capital expenditures and for general corporate
purposes. During 1997, non-utility subsidiaries of MichCon
borrowed $40 million under a non-recourse credit agreement that
matures in 2005. Proceeds were used to finance the expansion of
the northern Michigan gathering system. During 1997, MichCon also
 repaid $67 million of long-term debt.

As of December 1999, MichCon had an outstanding shelf
registration with $140 million remaining to be issued in the form
 of debt securities.

Investing Activities

MCNs cash flow from investing activities increased $739.9
million in 1999, and cash used for investing activities decreased
 $184.2 million in 1998. As previously discussed, the improvement
 in 1999 was due to cash received from sales of non-strategic
assets, coupled with lower capital expenditures and acquisitions.
 The 1998 decrease is also due primarily to lower capital
expenditures and acquisitions as well as cash received from the
repayment of an advance by a Philippine power producer.

53



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

During 1998 and 1997, MichCon invested $28.2 million and $31.3
million, respectively, in a Grantor Trust to meet future cash
flow obligations related to certain postretirement healthcare
costs.

Capital investments equaled $496.4 million in 1999 compared to
$790.9 million in 1998. The comparison reflects lower
acquisitions as well as lower Pipelines & Processing and
E&P capital expenditures. Partially offsetting these 1999
decreases were significantly higher investments in Electric Power
 projects.



---

|                                                   |                          |      |       |       |  |      |       |       |  |   |       |       | 
|-------------------------------------------------- | ------------------------ | ---- | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                   |                          | 1999 |       | 1998  |  | 1997
|(in Millions)                                      |                          |      |       |       |  |     
|                                                   |                          |      |       |       |  |     
|                                                  
|                                                  
|                                                  
|                                                  
|Capital Investments                                |                          |      |       |       |  |      |       |       |  |   |       |      
|Consolidated Capital Expenditures                  |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Pipelines & Processing   |      | $     | 3.6   |  |      | $     | 113.2 |  |   | $     | 19.5  | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Electric Power           |      |       | 52.4  |  |      |       | 3.6   |  |   |       | 4.8   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Exploration & Production |      |       | 100.0 |  |      |       | 200.4 |  |   |       | 375.0 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Gas Distribution         |      |       | 136.9 |  |      |       | 158.0 |  |   |       | 157.7 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                    |      |       | 1.4   |  |      |       | 7.6   |  |   |       | 5.7   | 
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                   |                          |      | 294.3 |       |  |      | 482.8 |       |  |   | 562.7 |      
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|MCNs Share of Joint Venture Capital Expenditures* |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Pipelines & Processing   |      |       | 94.3  |  |      |       | 219.9 |  |   |       | 152.2 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Electric Power           |      |       | 78.1  |  |      |       | 24.8  |  |   |       | 11.2  | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                    |      |       | .2    |  |      |       | 1.7   |  |   |       | 6.3   | 
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                   |                          |      | 172.6 |       |  |      | 246.4 |       |  |   | 169.7 |      
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|Acquisitions                                       |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Significant              |      |       | 22.5  |  |      |       | 54.0  |  |   |       | 227.2 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                    |      |       | 7.0   |  |      |       | 7.7   |  |   |       |      | 
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|                                                   |                          |      | 29.5  |       |  |      | 61.7  |       |  |   | 227.2 |      
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      
|Total Capital Investments                          |                          | $    | 496.4 |       |  | $    | 790.9 |       |  | $ | 959.6 |      
|                                                   |                          |      |       |       |  |      |       |       |  |   |       |      




|  |                                                                                               
|- | ----------------------------------------------------------------------------------------------
|* | A portion of joint venture capital expenditures is
	 financed with joint venture project debt.

Outlook

2000 capital investments estimated at $325 million MCNs revised strategic direction will result in
capital investments in future years of approximately $150 million
 to $350 million annually  significantly lower than in
 the past several years.

The proposed level of investments in future years is expected to
be financed primarily with internally generated funds, including
proceeds received from the sale of non-strategic assets.
MCNs actual capital requirements will depend on proceeds
received from the sale of such assets. MCNs capitalization
objective is to maintain its credit ratings through a strong
balance sheet. Its capitalization objective is a ratio of 50%
equity and 50% debt. It is managements opinion that MCN and
 its subsidiaries will have sufficient capital resources, both
internal and external, to meet anticipated capital requirements.

54



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

YEAR 2000

As a result of computer programs being written using two digits
rather than four digits to define the year, many programs that
had time sensitive software had the risk of recognizing a date
using 00 as the year 1900 rather than the year 2000.
This Year 2000 issue, if not addressed, could have caused
computer systems to malfunction, resulting in a material adverse
impact on MCNs operations and business processes.

MCN, aware of the Year 2000 potential impact, initiated a
corporate-wide program in 1997 to have its mission critical
business, and measurement and control systems Year 2000 ready.
MCN completed the Year 2000 implementation plan in
October 1999 for its mission critical systems and therefore
considered these systems Year 2000 ready at that time.

MCN has experienced no disruptions in its business operations as
a result of the Year 2000 issue and has had no significant
computer errors related to the Year 2000. The company continues
to monitor its computer systems and business operations for Year
2000 complications.

Costs associated with the Year 2000 issue totaled approximately
$5.2 million through December 1999. MCN does not expect to
incur any significant future costs as a result of the Year 2000.

This Year 2000 disclosure is a Year 2000 Readiness Disclosure
under the Year 2000 Information and Readiness Disclosure
 Act. Therefore, MCN claims the full protections
established by the Act.

MARKET RISK INFORMATION

MCNs primary market risk arises from fluctuations in
commodity prices and interest rates. MCN manages commodity price
and interest rate risk through the use of various derivative
instruments and limits the use of such instruments to hedging
activities. If MCN did not use derivative instruments, its
exposure to such risk would be higher. A further discussion of
MCNs risk management activities is included in Note 14
 to the Consolidated Financial Statements.

Commodity Price Risk

MCNs exposure to commodity price risk arises from changes
in natural gas, natural gas liquids, oil and methanol prices
throughout the United States and in eastern Canada where MCN
conducts sales and purchase transactions. MCN closely monitors
and manages its exposure to commodity price risk through a
variety of risk management techniques. Natural gas and oil
futures and swap agreements are used to manage MCNs
exposure to the risk of market price fluctuations on gas sale and
 purchase contracts, natural gas and oil production and gas
inventories.

A sensitivity analysis model was used to calculate the fair
values of MCNs natural gas and oil futures and swap
agreements utilizing applicable forward commodity rates in effect
 at December 31, 1999. The sensitivity analysis involved
increasing and decreasing the forward rates by a hypothetical 10%
 and calculating the resulting change in the fair values of the
gas and oil futures and swap agreements.

55



---



##### Table of Contents



|        |                                                
|------- | -----------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND ANALYSIS(CONTINUED)

Interest Rate Risk

MCN is subject to interest rate risk in connection with the
issuance of variable- and fixed-rate debt and preferred
securities. In order to manage interest costs, MCN uses interest
rate swap agreements to exchange fixed- and variable-rate
interest payment obligations over the life of the agreements
without exchange of the underlying principal amounts. MCNs
exposure to interest rate risk arises primarily from changes in
U.S. Treasury rates and London Inter-Bank Offered Rates (LIBOR).

A sensitivity analysis model was used to calculate the fair
values or cash flows of MCNs debt and preferred securities,
 as well as its interest rate swaps, utilizing applicable forward
 interest rates in effect at December 31, 1999. The
sensitivity analysis involved increasing and decreasing the
forward rates by a hypothetical 10% and calculating the resulting
 change in the fair values or cash flows of the interest rate
sensitive instruments.

The results of the sensitivity model calculations follow:



---

|                           |                                    |              |   |              |   |               |   |       |   |  |  |            | 
|-------------------------- | ---------------------------------- | ------------ | - | ------------ | - | ------------- | - | ----- | - |  |  | ---------- | 
|                           |                                    | Assuming     |   | Assuming     |   |              
|                           |                                    | A 10%        |   | A 10%        |   | Favorable    
|                           |                                    | Increase in  |   | Decrease in  |   | (Unfavorable)
|                           |                                    | Prices/Rates |   | Prices/Rates |   | Change in    
|(in Millions)              |                                    |              |   |              |   |              
|                           |                                    |              |   |              |   |              
|                          
|                          
|                          
|                          
|Market Risk                |                                    |              |   |              |   |               |   |       |   |  |  |           
|Commodity Price Sensitive* |                                    |              |   |              |   |               |   |       |   |  |  |           
|                          
|                          
|                          
|                          
|                           | Swaps  pay fixed/receive variable |              | $ | 89.8         |   |               | $ | (89.8 | ) |  |  | Fair Value | 
|                          
|                          
|                          
|                          
|                           |  pay
	variable/receive fixed      |              | $ | (81.1        | ) |               | $ | 81.1  |   |  |  | Fair Value | 
|                          
|                          
|                          
|                          
|                           | Futures  Longs                    |              | $ | 5.0          |   |               | $ | (5.0  | ) |  |  | Fair Value | 
|                          
|                          
|                          
|                          
|                           |  Shorts                           |              | $ | (2.1         | ) |               | $ | 2.1   |   |  |  | Fair Value | 
|Interest Rate Sensitive    |                                    |              |   |              |   |               |   |       |   |  |  |           
|                          
|                          
|                          
|                          
|                           | Debt  fixed rate                  |              | $ | 58.3         |   |               | $ | (58.3 | ) |  |  | Fair Value | 
|                          
|                          
|                          
|                          
|                           |  variable rate                    |              | $ | (.5          | ) |               | $ | .5    |   |  |  | Cash Flow  | 
|                          
|                          
|                          
|                          
|                           | Swaps  pay fixed/receive variable |              | $ | .2           |   |               | $ | (.2   | ) |  |  | Fair Value | 
|                          
|                          
|                          
|                          
|                           |  pay
	variable/receive fixed      |              | $ | (2.8         | ) |               | $ | 2.8   |   |  |  | Fair Value | 




|  |                                                                                                                                              
|- | ---------------------------------------------------------------------------------------------------------------------------------------------
|* | Includes only the risk related to the derivative
	instruments that serve as hedges and does not include the related
	 underlying hedged item.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the Financial Accounting Standards Board
(FASB) issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities,
effective for fiscal years beginning after June 15, 1999. In
 June 1999, the FASB issued SFAS No. 137, Accounting for Derivative Instruments and Hedging
Activities  Deferral of the Effective Date of FASB
Statement No. 133. SFAS No. 137 changes the
effective date of SFAS No. 133 to fiscal years beginning
after June 15, 2000.

SFAS No. 133 requires all derivatives to be recognized in
the balance sheet as either assets or liabilities measured at
their fair value, and sets forth conditions in which a derivative
 instrument may be designated as a hedge. The Statement requires
that changes in the fair value of derivatives

56



---



##### Table of Contents



ITEM 7.  MANAGEMENTS DISCUSSION AND
ANALYSIS(CONCLUDED)


be recognized currently in earnings unless specific hedge
accounting criteria are met. Special accounting for qualifying
hedges allows a derivatives gains and losses to be recorded
 to other comprehensive income or to offset related results on
the hedged item in earnings.

MCN manages gas price risk and interest rate risk through the use
 of various derivative instruments and limits the use of such
instruments to hedging activities. The effects of SFAS
No. 133 on MCNs financial statements are subject to
fluctuations in the market value of hedging contracts which are,
in turn, affected by variations in gas prices and in interest
rates. Accordingly, management cannot quantify the effects of
adopting SFAS No. 133 at this time.

57



---



##### Table of Contents








|         |                                               
|-------- | ----------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

MARKET RISK


For information required pursuant to this item refer to
Item 7. MD&A  Market Risk
Information, page 55 of this report.

58



---



##### Table of Contents








ITEM 8.  FINANCIAL STATEMENTS AND
SUPPLEMENTARY DATA


|                                                                               |                                                 |      |     |     | 
|------------------------------------------------------------------------------ | ----------------------------------------------- | ---- | --- | --- | 
|                                                                               |                                                 | Page
|                                                                               |                                                 |     
|Consolidated Statement of Operations                                           |                                                 |      | 60  |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Consolidated Statement of Financial Position                                   |                                                 |      | 61  |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Consolidated Statement of Cash Flows                                           |                                                 |      | 63  |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Consolidated Statement of Common Shareholders Equity                          |                                                 |      | 65  |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Notes to the Consolidated Financial Statements                                 |                                                 |      | 66  |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Responsibilities for Financial Statements                                      |                                                 |      | 111 |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Independent Auditors Report                                                   |                                                 |      | 112 |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Supplementary Financial Information  Quarterly
	Operating Results (Unaudited) |                                                 |      | 113 |    
|                                                                              
|Financial Statement Schedule -                                                 |                                                 |      |     |    
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Schedule II  Valuation and Qualifying Accounts |      |     | 115 | 

59



---



##### Table of Contents



CONSOLIDATED STATEMENT OF OPERATIONS




|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |           |  
|-------------------------------------------------------------- | ------------------------------------------------------- | ---------------------- | --------- | --------- | - | ---- | --------- | --------- | - | - | --------- | --------- | -
|                                                               |                                                         |                       
|                                                               |                                                         | Year Ended December 31
|                                                               |                                                         |                       
|(in Thousands, Except Per Share Amounts)                       |                                                         | 1999                   |           | 1998      |   | 1997
|                                                               |                                                         |                        |           |           |   |     
|Operating Revenues                                             |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas and oil sales                                       |                        | $         | 2,238,111 |   |      | $         | 1,813,343 |   |   | $         | 2,014,418 |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Transportation                                          |                        |           | 151,216   |   |      |           | 139,609   |   |   |           | 129,953   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                   |                        |           | 91,741    |   |      |           | 77,746    |   |   |           | 63,496    |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               |                                                         |                        | 2,481,068 |           |   |      | 2,030,698 |           |   |   | 2,207,867 |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Operating Expenses                                             |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cost of sales                                           |                        |           | 1,614,992 |   |      |           | 1,205,774 |   |   |           | 1,335,033 |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Operation and maintenance                               |                        |           | 411,223   |   |      |           | 389,415   |   |   |           | 393,341   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Depreciation, depletion and amortization                |                        |           | 164,638   |   |      |           | 179,490   |   |   |           | 181,612   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property and other taxes                                |                        |           | 57,197    |   |      |           | 69,553    |   |   |           | 75,491    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property write-downs and restructuring charges (Note 3) |                        |           | 59,335    |   |      |           | 592,318   |   |   |           |          |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Merger costs (Note 2)                                   |                        |           | 34,855    |   |      |           |          |   |   |           |          |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               |                                                         |                        | 2,342,240 |           |   |      | 2,436,550 |           |   |   | 1,985,477 |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Operating Income (Loss)                                        |                                                         |                        | 138,828   |           |   |      | (405,852  | )         |   |   | 222,390   |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Equity in Earnings of Joint Ventures(Note 6)                   |                                                         |                        | 52,386    |           |   |      | 62,225    |           |   |   | 55,659    |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Other Income and (Deductions)                                  |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest income                                         |                        |           | 6,575     |   |      |           | 10,893    |   |   |           | 11,166    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest on long-term debt                              |                        |           | (89,431   | ) |      |           | (87,346   | ) |   |           | (75,170   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other interest expense                                  |                        |           | (30,342   | ) |      |           | (24,404   | ) |   |           | (11,283   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Dividends on preferred securities of subsidiaries       |                        |           | (40,139   | ) |      |           | (36,370   | ) |   |           | (31,090   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Loss on sale of E&P properties (Note 3d)                |                        |           | (81,989   | ) |      |           |          |   |   |           |          |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investment and contract losses (Note 3)                 |                        |           | (9,903    | ) |      |           | (14,635   | ) |   |           |          |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Minority interest                                       |                        |           | (1,612    | ) |      |           | 5,992     |   |   |           | (1,964    | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                   |                        |           | 17,948    |   |      |           | 19,561    |   |   |           | 10,759    |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               |                                                         |                        | (228,893  | )         |   |      | (126,309  | )         |   |   | (97,582   | )        
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Income (Loss) Before Income Taxes                              |                                                         |                        | (37,679   | )         |   |      | (469,936  | )         |   |   | 180,467   |          
|                                                              
|                                                              
|                                                              
|                                                              
|Income Tax Provision (Benefit)                                 |                                                         |                        | (9,703    | )         |   |      | (183,468  | )         |   |   | 47,238    |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Income (Loss) Before Cumulative Effect of Accounting Change    |                                                         |                        | (27,976   | )         |   |      | (286,468  | )         |   |   | 133,229   |          
|                                                              
|                                                              
|                                                              
|                                                              
|Cumulative Effect of Accounting Change, Net of Taxes
	(Note 5) |                                                         |                        | (2,872    | )         |   |      |          |           |   |   |          |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Net Income (Loss)                                              |                                                         | $                      | (30,848   | )         |   | $    | (286,468  | )         |   | $ | 133,229   |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Basic Earnings (Loss) Per Share(Note 11d)                      |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Before cumulative effect of accounting change           |                        | $         | (.34      | ) |      | $         | (3.63     | ) |   | $         | 1.82      |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cumulative effect of accounting change (Note 5)         |                        |           | (.03      | ) |      |           |          |   |   |           |          |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               |                                                         | $                      | (.37      | )         |   | $    | (3.63     | )         |   | $ | 1.82      |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Diluted Earnings (Loss) Per Share(Note 11d)                    |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Before cumulative effect of accounting change           |                        | $         | (.34      | ) |      | $         | (3.63     | ) |   | $         | 1.79      |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cumulative effect of accounting change (Note 5)         |                        |           | (.03      | ) |      |           |          |   |   |           |          |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               |                                                         | $                      | (.37      | )         |   | $    | (3.63     | )         |   | $ | 1.79      |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Average Common Shares Outstanding                              |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Basic                                                   |                        |           | 83,407    |   |      |           | 78,823    |   |   |           | 72,887    |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|                                                               | Diluted                                                 |                        |           | 83,407    |   |      |           | 78,823    |   |   |           | 75,435    |  
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          
|Dividends Declared Per Share                                   |                                                         | $                      | 1.0200    |           |   | $    | 1.0200    |           |   | $ | .9825     |          
|                                                               |                                                         |                        |           |           |   |      |           |           |   |   |           |          



---

The notes to the consolidated financial statements
 are an integral part of this statement.


60



---



##### Table of Contents



CONSOLIDATED STATEMENT OF FINANCIAL POSITION




|                                                      |                                                                                                |             |           |           |  |   |           |           | 
|----------------------------------------------------- | ---------------------------------------------------------------------------------------------- | ----------- | --------- | --------- |  | - | --------- | --------- | 
|                                                      |                                                                                                |            
|                                                      |                                                                                                | December 31
|                                                      |                                                                                                |            
|                                                      |                                                                                                | 1999        |           | 1998     
|(in Thousands)                                        |                                                                                                |             |           |          
|ASSETS                                                |                                                                                                |             |           |           |  |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|Current Assets                                        |                                                                                                |             |           |           |  |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Cash and cash equivalents, at cost (which approximates market
	value)                          |             | $         | 59,366    |  |   | $         | 17,039    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounts receivable, less allowance for doubtful accounts of
	$20,720 and $9,665, respectively |             |           | 546,689   |  |   |           | 400,120   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accrued unbilled revenues                                                                      |             |           | 100,439   |  |   |           | 87,888    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gas in inventory                                                                               |             |           | 180,372   |  |   |           | 147,387   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Property taxes assessed applicable to future periods                                           |             |           | 62,651    |  |   |           | 72,551    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes (Note 17)                                                                |             |           | 32,508    |  |   |           |          | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                                                                          |             |           | 51,313    |  |   |           | 42,472    | 
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                |             | 1,033,338 |           |  |   | 767,457   |          
|                                                      |                                                                                                |             |           |           |  |   |           |          
|Deferred Charges and Other Assets                     |                                                                                                |             |           |           |  |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred income taxes (Note 17)                                                                |             |           | 14,765    |  |   |           | 50,547    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Investments in debt and equity securities                                                      |             |           | 72,077    |  |   |           | 69,705    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred swap losses and receivables (Note 14a)                                                |             |           | 43,907    |  |   |           | 63,147    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Deferred environmental costs (Note 13c)                                                        |             |           | 31,173    |  |   |           | 30,773    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Prepaid benefit costs (Note 16a)                                                               |             |           | 156,276   |  |   |           | 111,775   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                                                                          |             |           | 108,288   |  |   |           | 98,940    | 
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                |             | 426,486   |           |  |   | 424,887   |          
|                                                      |                                                                                                |             |           |           |  |   |           |          
|Investments in and Advances to Joint Ventures(Note 6) |                                                                                                |             |           |           |  |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Pipelines & Processing                                                                         |             |           | 575,684   |  |   |           | 521,711   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Electric Power                                                                                 |             |           | 145,684   |  |   |           | 231,668   | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Energy Marketing                                                                               |             |           | 21,512    |  |   |           | 29,435    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gas Distribution                                                                               |             |           | 2,898     |  |   |           | 1,478     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                                                                          |             |           | 18,194    |  |   |           | 18,939    | 
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                |             | 763,972   |           |  |   | 803,231   |          
|                                                      |                                                                                                |             |           |           |  |   |           |          
|Property, Plant and Equipment                         |                                                                                                |             |           |           |  |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Pipelines & Processing                                                                         |             |           | 46,480    |  |   |           | 48,706    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Exploration & Production (Notes 3d and 4c)                                                     |             |           | 573,514   |  |   |           | 1,040,047 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Gas Distribution                                                                               |             |           | 3,016,231 |  |   |           | 2,916,540 | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Other                                                                                          |             |           | 76,245    |  |   |           | 36,124    | 
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                |             | 3,712,470 |           |  |   | 4,041,417 |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Less  Accumulated depreciation and depletion                                                  |             |           | 1,697,212 |  |   |           | 1,644,094 | 
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                |             | 2,015,258 |           |  |   | 2,397,323 |          
|                                                      |                                                                                                |             |           |           |  |   |           |          
|                                                      |                                                                                                | $           | 4,239,054 |           |  | $ | 4,392,898 |          
|                                                      |                                                                                                |             |           |           |  |   |           |          




The notes to the consolidated financial statements
 are an integral part of this statement.


61



---



##### Table of Contents



CONSOLIDATED STATEMENT OF FINANCIAL POSITION




|                                                  |                                                                                                                         |             |           |           |  |   |           |           | 
|------------------------------------------------- | ----------------------------------------------------------------------------------------------------------------------- | ----------- | --------- | --------- |  | - | --------- | --------- | 
|                                                  |                                                                                                                         |            
|                                                  |                                                                                                                         | December 31
|                                                  |                                                                                                                         |            
|                                                  |                                                                                                                         | 1999        |           | 1998     
|(in Thousands)                                    |                                                                                                                         |             |           |          
|LIABILITIES AND CAPITALIZATION                    |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|Current Liabilities                               |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accounts payable                                                                                                        |             | $         | 296,139   |  |   | $         | 304,349   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Notes payable                                                                                                           |             |           | 617,755   |  |   |           | 618,851   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Current portion of long-term debt and capital lease obligations                                                         |             |           | 28,102    |  |   |           | 269,721   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Federal income, property and other taxes payable                                                                        |             |           | 68,500    |  |   |           | 69,465    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred gas cost recovery revenues                                                                                     |             |           |          |  |   |           | 14,980    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Gas payable                                                                                                             |             |           | 24,858    |  |   |           | 42,669    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Customer deposits                                                                                                       |             |           | 17,707    |  |   |           | 18,791    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other                                                                                                                   |             |           | 146,949   |  |   |           | 108,310   | 
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                  |                                                                                                                         |             | 1,200,010 |           |  |   | 1,447,136 |          
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|Deferred Credits and Other Liabilities            |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Unamortized investment tax credits                                                                                      |             |           | 28,022    |  |   |           | 30,056    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Tax benefits amortizable to customers                                                                                   |             |           | 136,236   |  |   |           | 130,120   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Deferred swap gains and payables (Note 14a)                                                                             |             |           | 64,962    |  |   |           | 62,956    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Accrued environmental costs (Note 13c)                                                                                  |             |           | 28,068    |  |   |           | 35,000    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Minority interest                                                                                                       |             |           | 11,096    |  |   |           | 10,898    | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Other                                                                                                                   |             |           | 91,613    |  |   |           | 75,439    | 
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                  |                                                                                                                         |             | 359,997   |           |  |   | 344,469   |          
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|Commitments and Contingencies(Notes 7, 12 and 13) |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|Capitalization                                    |                                                                                                                         |             |           |           |  |   |           |          
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Long-term debt, including capital lease obligations (Note 9)                                                            |             |           | 1,457,617 |  |   |           | 1,307,168 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | MCN-obligated mandatorily redeemable preferred securities of
	subsidiaries holding solely debentures of MCN (Note  10a) |             |           | 402,922   |  |   |           | 502,203   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Common shareholders equity (see accompanying statement)                                                                |             |           | 818,508   |  |   |           | 791,922   | 
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                  |                                                                                                                         |             | 2,679,047 |           |  |   | 2,601,293 |          
|                                                  |                                                                                                                         |             |           |           |  |   |           |          
|                                                  |                                                                                                                         | $           | 4,239,054 |           |  | $ | 4,392,898 |          
|                                                  |                                                                                                                         |             |           |           |  |   |           |          



---

The notes to the consolidated financial statements
 are an integral part of this statement.


62



---



##### Table of Contents



CONSOLIDATED STATEMENT OF CASH FLOWS




|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |          |         |         |          |  
|---------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | --------------------------- | ------------------------------------------------------ | -------- | ------- | -------- | -------- | ------- | ------- | -------- | -------- | ------- | ------- | -------- | -
|                                                     |                                                                                            |                                                                          
|                                                     |                                                                                            | Year Ended December 31                                                   
|                                                     |                                                                                            |                                                                          
|                                                     |                                                                                            | 1999                                                                      |                             | 1998                                                   |          | 1997   
|(in Thousands)                                       |                                                                                            |                                                                           |                             |                                                        |          |        
|Cash Flow From Operating Activities                  |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Net income (loss)                                                                          |                                                                           | $                           | (30,848                                                | )        |         | $        | (286,468 | )       |         | $        | 133,229  |        
|                                                     | Adjustments to reconcile net income (loss) to net cash
	provided from operating activities |                                                                           |                             |                                                        |          |         |          |          |         |         |          |          |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Depreciation, depletion and amortization:                                 |                             |                                                        |          |         |          |          |         |         |          |          |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            |                                                                           | Per statement of operations |                                                        |          | 164,638 |          |          |         | 179,490 |          |          |         | 181,612 |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            |                                                                           | Charged to other accounts   |                                                        |          | 9,055   |          |          |         | 8,000   |          |          |         | 7,728   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Unusual charges, net of taxes (Note 3)                                    |                             |                                                        | 98,298   |         |          |          | 389,598 |         |          |          |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Cumulative effect of accounting change, net of taxes (Note 5)             |                             |                                                        | 2,872    |         |          |          |        |         |          |          |        |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Deferred income taxes  current                                           |                             |                                                        | (41,915  | )       |          |          | (2,587  | )       |          |          | (2,701  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Deferred income taxes and investment tax credits, net                     |                             |                                                        | 84,462   |         |          |          | 14,565  |         |          |          | 11,660  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Equity in earnings of joint ventures, net of distributions                |                             |                                                        | (12,529  | )       |          |          | (40,360 | )       |          |          | (16,511 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Other                                                                     |                             |                                                        | (1,313   | )       |          |          | (11,550 | )       |          |          | (5,456  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     |                                                                                            | Changes in assets and liabilities, exclusive of changes shown
	separately |                             |                                                        | (142,433 | )       |          |          | (97,966 | )       |          |          | 33,823  |        
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                     |                                                                                            |                                                                           |                             | Net cash provided from operating activities            |          |         | 130,287  |          |         |         | 152,722  |          |         |         | 343,384  |  
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|Cash Flow From Financing Activities                  |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                                         |                                                                           |                             | (1,096                                                 | )        |         |          | 307,482  |         |         |          | 68,000   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                                             |                                                                           |                             | (86,256                                                | )        |         |          | (82,239  | )       |         |          | (72,851  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock (Note 11)                                                         |                                                                           |                             | 136,145                                                |          |         |          | 20,192   |         |         |          | 294,402  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reacquisition of common stock                                                              |                                                                           |                             | (6,745                                                 | )        |         |          |         |         |         |          |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of preferred securities (Note 10)                                                 |                                                                           |                             |                                                       |          |         |          | 96,850   |         |         |          | 326,521  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of long-term debt (Note 9)                                                        |                                                                           |                             | 106,535                                                |          |         |          | 458,761  |         |         |          | 273,241  |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net (Note 9)                               |                                                                           |                             | 92,344                                                 |          |         |          | 17,299   |         |         |          | (261,822 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities
	(Notes 9 and 10)                    |                                                                           |                             | (395,789                                               | )        |         |          | (328,810 | )       |         |          | (109,224 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                                      |                                                                           |                             |                                                       |          |         |          | 8,243    |         |         |          | 4,612    |        
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                     |                                                                                            |                                                                           |                             | Net cash provided from (used for) financing activities |          |         | (154,862 | )        |         |         | 497,778  |          |         |         | 522,879  |  
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|Cash Flow From Investing Activities                  |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                                       |                                                                           |                             | (294,258                                               | )        |         |          | (482,775 | )       |         |          | (561,354 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions (Note 4)                                                                      |                                                                           |                             | (29,551                                                | )        |         |          | (42,429  | )       |         |          | (166,553 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                              |                                                                           |                             | (4,157                                                 | )        |         |          | 17,831   |         |         |          | (63,123  | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures                                                               |                                                                           |                             | (77,427                                                | )        |         |          | (189,309 | )       |         |          | (152,642 | )      
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests (Note 4)                                      |                                                                           |                             | 470,904                                                |          |         |          | 47,185   |         |         |          | 67,365   |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                                      |                                                                           |                             | 1,391                                                  |          |         |          | (23,459  | )       |         |          | 19,077   |        
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                     |                                                                                            |                                                                           |                             | Net cash provided from (used for) investing activities |          |         | 66,902   |          |         |         | (672,956 | )        |         |         | (857,230 | )
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                                            |                                                                           | 42,327                      |                                                        |          |         | (22,456  | )        |         |         | 9,033    |         
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                                            |                                                                           | 17,039                      |                                                        |          |         | 39,495   |          |         |         | 30,462   |         
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|Cash and Cash Equivalents, December 31               |                                                                                            | $                                                                         | 59,366                      |                                                        |          | $       | 17,039   |          |         | $       | 39,495   |         
|                                                     |                                                                                            |                                                                           |                             |                                                        |          |         |          |          |         |         |          |         
|                                                    

63



---



##### Table of Contents



CONSOLIDATED STATEMENT OF CASH FLOWS
(CONTINUED)





|                                                                          |                                                  |                        |          |         |   |      |         |         |   |   |        |         |  
|------------------------------------------------------------------------- | ------------------------------------------------ | ---------------------- | -------- | ------- | - | ---- | ------- | ------- | - | - | ------ | ------- | -
|                                                                          |                                                  |                       
|                                                                          |                                                  | Year Ended December 31
|                                                                          |                                                  |                       
|                                                                          |                                                  | 1999                   |          | 1998    |   | 1997
|(in Thousands)                                                            |                                                  |                        |          |         |   |     
|Changes in Assets and Liabilities, Exclusive of Changes Shown
	Separately |                                                  |                        |          |         |   |      |         |         |   |   |        |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts receivable, net                         |                        | $        | (63,377 | ) |      | $       | (6,653  | ) |   | $      | (49,017 | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued unbilled revenues                        |                        |          | (12,551 | ) |      |         | 5,122   |   |   |        | 15,499  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas in inventory                                 |                        |          | (32,985 | ) |      |         | (90,610 | ) |   |        | 22,384  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued/deferred gas cost recovery revenues, net |                        |          | (14,980 | ) |      |         | 27,842  |   |   |        | 14,810  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Prepaid/accrued benefit costs, net               |                        |          | (44,457 | ) |      |         | (31,490 | ) |   |        | (16,086 | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts payable                                 |                        |          | (35     | ) |      |         | (35,597 | ) |   |        | 24,273  |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Federal income, property and other taxes payable |                        |          | (965    | ) |      |         | (17,333 | ) |   |        | (10,820 | )
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas payable                                      |                        |          | (17,811 | ) |      |         | 34,352  |   |   |        | 5,524   |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other current assets and liabilities, net        |                        |          | 41,187  |   |      |         | 8,152   |   |   |        | 5,998   |  
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other deferred assets and liabilities, net       |                        |          | 3,541   |   |      |         | 8,249   |   |   |        | 21,258  |  
|                                                                          |                                                  |                        |          |         |   |      |         |         |   |   |        |        
|                                                                          |                                                  | $                      | (142,433 | )       |   | $    | (97,966 | )       |   | $ | 33,823 |        
|                                                                          |                                                  |                        |          |         |   |      |         |         |   |   |        |        




The notes to the consolidated financial statements
 are an integral part of this statement.


64



---



##### Table of Contents



CONSOLIDATED STATEMENT OF COMMON
SHAREHOLDERS EQUITY




|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |         |        |  
|----------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------- | -------------------------------------------------------------------------------------------- | ------- | -------- | ------- | ---- | -------- | -------- | ------- | - | --------- | ------- | ------ | -
|                                                                                                                                                |                                                    |                                                                                             
|                                                                                                                                                |                                                    | Year Ended December 31                                                                      
|                                                                                                                                                |                                                    |                                                                                             
|                                                                                                                                                |                                                    | 1999                                                                                         |         | 1998     |         | 1997
|(in Thousands)                                                                                                                                  |                                                    |                                                                                              |         |          |         |     
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |     
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|COMMON SHAREHOLDERS EQUITY(Note 11)                                                                                                            |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|Common Stock,par value $.01 per share  250,000,000 shares
	authorized, 85,655,381, 79,724,542 and 78,231,889 shares
	outstanding, respectively |                                                    | $                                                                                            | 857     |          |         | $    | 797      |          |         | $ | 782       |        
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|Additional Paid-in Capital                                                                                                                      |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Balance  beginning of period                      |                                                                                              |         | 832,966  |         |      |          | 806,997  |         |   |           | 493,078 |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Common stock and performance units                 |                                                                                              |         | 127,210  |         |      |          | 25,969   |         |   |           | 313,485 |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Other                                              |                                                                                              |         |         |         |      |          |         |         |   |           | 434     |       
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                | Balance  end of period                            |                                                                                              |         | 960,176  |         |      |          | 832,966  |         |   |           | 806,997 |       
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|Accumulated Other Comprehensive Loss                                                                                                            |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                | Foreign Currency Translation Adjustments           |                                                                                              |         |          |         |      |          |          |         |   |           |         |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Balance  beginning of period                                                                |         |          | (12,889 | )    |          |          | (6,335  | ) |           |         | (43    | )
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Net change in foreign currency translation adjustment (a)                                    |         |          | 12,733  |      |          |          | (6,554  | ) |           |         | (6,292 | )
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                |                                                    | Balance  end of period                                                                      |         |          | (156    | )    |          |          | (12,889 | ) |           |         | (6,335 | )
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                | Unrealized Losses on Securities                    |                                                                                              |         |          |         |      |          |          |         |   |           |         |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Balance  beginning of period                                                                |         |          | (3,687  | )    |          |          | (1,184  | ) |           |         |       |  
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Net change in unrealized losses on securities (a)                                            |         |          | 3,687   |      |          |          | (2,503  | ) |           |         | (1,184 | )
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                |                                                    | Balance  end of period                                                                      |         |          |        |      |          |          | (3,687  | ) |           |         | (1,184 | )
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                |                                                    | Balance  end of period                                                                      |         |          | (156    | )    |          |          | (16,576 | ) |           |         | (7,519 | )
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|Retained Earnings                                                                                                                               |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Balance  beginning of period                      |                                                                                              |         | (2,977   | )       |      |          | 365,730  |         |   |           | 305,352 |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Net income (loss) (a)                              |                                                                                              |         | (30,848  | )       |      |          | (286,468 | )       |   |           | 133,229 |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Cash dividends declared                            |                                                                                              |         | (86,256  | )       |      |          | (82,239  | )       |   |           | (72,851 | )     
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                | Balance  end of period                            |                                                                                              |         | (120,081 | )       |      |          | (2,977   | )       |   |           | 365,730 |       
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|Yield Enhancement, Contract and Issuance Costs                                                                                                  |                                                    |                                                                                              | (22,288 | )        |         |      | (22,288  | )        |         |   | (22,039   | )      
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                |                                                    | $                                                                                            | 818,508 |          |         | $    | 791,922  |          |         | $ | 1,143,951 |        
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|(a) Disclosure of Comprehensive Income(Note 1)                                                                                                  |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Net income (loss)                                  |                                                                                              | $       | (30,848  | )       |      | $        | (286,468 | )       |   | $         | 133,229 |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Other comprehensive income, net of tax:            |                                                                                              |         |          |         |      |          |          |         |   |           |         |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Foreign Currency Translation Adjustment (Note 4b): |                                                                                              |         |          |         |      |          |          |         |   |           |         |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Foreign currency translation losses net of taxes of $215, $3,529
	and $3,388                 |         |          | (399    | )    |          |          | (6,554  | ) |           |         | (6,292 | )
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Reclassification of losses recognized in net income, net of taxes
	 of $7,072, $ and $     |         |          | 13,132  |      |          |          |        |   |           |         |       |  
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                | Unrealized Losses on Securities:                   |                                                                                              |         |          |         |      |          |          |         |   |           |         |       
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Unrealized losses on securities, net of taxes of $625, $3,495 and
	 $637                     |         |          | (1,159  | )    |          |          | (6,490  | ) |           |         | (1,184 | )
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                               
|                                                                                                                                                |                                                    | Reclassification of losses recognized in net income, net of taxes
	 of $2,610, $2,147 and $- |         |          | 4,846   |      |          |          | 3,987   |   |           |         |       |  
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        
|                                                                                                                                                |                                                    | $                                                                                            | (14,428 | )        |         | $    | (295,525 | )        |         | $ | 125,753   |        
|                                                                                                                                                |                                                    |                                                                                              |         |          |         |      |          |          |         |   |           |        




The notes to the consolidated financial statements
 are an integral part of this statement.


65



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|   |                                           
|-- | ------------------------------------------
|1. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Company Description MCN Energy Group Inc.
(MCN) is a diversified energy company with markets and
investments primarily in the Midwest-to-Northeast corridor. MCN
operates through two major business groups, Diversified Energy
and Gas Distribution.

Diversified Energy, operating through MCN Energy
Enterprises Inc. (MCNEE), formerly MCN Investment Corporation, is
 a wholly owned subsidiary of MCN and serves as a holding company
 for MCNs non-utility businesses. MCNEE is involved in the
following segments:



|  |                                                                                                                                                                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Pipelines & Processinghas pipeline, gathering,
	processing and related facilities in major supply areas.                                                                                                                                                                                                  
| 
| | Electric Powerhas joint venture interests in electric
	power generation facilities. Electric Power also provides fuel
	management services and supplies gas to power generation
	facilities under long-term sales contracts.                                                                              
| 
| | Energy Marketingsells premium, reliable bundled energy
	services to large-volume customers. The segment also has rights
	to market-area storage capacity. Energy Marketing also sells gas
	to other gas marketers and brokerage companies.                                                                
| 
| | Exploration & Production(E&P) is engaged in
	natural gas and oil exploration, development and production.
	Consistent with its new strategic direction, MCN retained its
	natural gas producing properties in Michigan and sold its
	Western, Midcontinent/ Gulf Coast and Appalachia properties in
	1999.

Gas Distributionconsists principally of MichCon, a
natural gas utility serving approximately 1.2 million customers
in more than 530 communities throughout Michigan. MichCon is
subject to the accounting requirements and rate regulation of the
 Michigan Public Service Commission (MPSC) with respect to the
distribution and intrastate transportation of natural gas. Gas
Distribution also includes Citizens Gas Fuel Company (Citizens),
a small gas utility serving approximately 15,000 customers in
Adrian, Michigan. Citizens rates are regulated by the
Adrian Gas Rate Commission.

Basis of Presentation The accompanying
consolidated financial statements were prepared in conformity
with generally accepted accounting principles. In connection with
 their preparation, management was required to make estimates and
 assumptions that affect the reported amounts of assets,
liabilities, revenues, expenses and the disclosure of contingent
liabilities. Actual results could differ from those estimates.
Certain reclassifications have been made to prior years
statements to conform to the 1999 presentation.

Principles of Consolidation The consolidated
financial statements include the accounts of MCN and certain
consolidated subsidiaries and partnerships. Investments in
entities in which MCN has a controlling influence that it intends
 to maintain are consolidated. Generally, investments in 50% or
less owned entities in which MCN has significant but not
controlling influence, and entities where control is temporary,
have been accounted for under the equity method.

66



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Revenues and Cost of Gas Gas Distribution
accrues revenues for gas service provided but unbilled at month
end. Through December 31, 1998, MichCons accrued
revenues included a component for cost of gas sold that was
recoverable through the gas cost recovery (GCR) mechanism.
Prior to 1999, GCR proceedings before the MPSC permitted MichCon
to recover the prudent and reasonable cost of gas sold. Beginning
 in 1999, MichCon implemented a Regulatory Reform Plan approved
by the MPSC. The Plan suspended the GCR mechanism and fixed the
gas commodity component of MichCons sales rates for the
three-year period beginning in January 1999. Accordingly,
MichCon no longer accrues revenues under this mechanism.

Natural Gas and Oil Exploration and Production The full-cost accounting method prescribed by the Securities
and Exchange Commission (SEC) is followed for investments in
 gas and oil properties. Under the full-cost method,
substantially all acquisition, exploration and development costs
are capitalized. To the extent such capitalized costs exceed the
ceiling, the excess is written off to income. The
ceiling is the sum of discounted future net cash flows from the
production of proved gas and oil reserves (using unescalated
prices and costs unless contractual arrangements exist), and the
lower of cost or estimated fair value of unproved properties, net
 of related income tax effects. The ceiling test is applied at
the end of each quarter and requires a write-down of gas and oil
properties if the ceiling is exceeded, even if any price decline
is temporary. Managements investment and operating
decisions are based upon prices, costs and production assumptions
 that are different from those used to compute the ceiling. As a
result, it is possible that future fluctuations in key forecast
assumptions could result in impairments being recorded for
accounting purposes, when the long-term economics of such
properties have not changed.

The unit of production method is used for calculating
depreciation, depletion and amortization (DD&A) on proved gas
 and oil properties. The average DD&A expense per thousand
cubic feet equivalent (Mcfe) was $.83, $.82 and $.75 in 1999,
1998 and 1997, respectively. Costs directly associated with the
acquisition and evaluation of unproved gas and oil properties are
 excluded from the amortization base until the related properties
 are evaluated. Such unproved properties are assessed
periodically, and a provision for impairment is made to the
full-cost amortization base when appropriate.

Comprehensive Income MCN complies with the
provisions of Statement of Financial Accounting Standards (SFAS)
No. 130, Reporting Comprehensive Income,
which establishes standards for the reporting and display of
comprehensive income. Comprehensive income is defined as the
change in common shareholders equity during a period from
transactions and events from non-owner sources, including net
income. Other items of comprehensive income include revenues,
expenses, gains and losses that are excluded from net income.
Items of other comprehensive income applicable to MCN and their
accounting policies are as follows:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Foreign Currency Translation Adjustments 
	MCNs foreign joint ventures use the local currency as the
	functional currency. As a result, MCNs investments in
	foreign entities are translated from foreign currencies into U.S.
	 dollars using end-of-period exchange rates. Equity in earnings
	of foreign entities is translated at the average exchange rate
	prevailing during the month the respective earnings occur.
	Translation adjustments, net of taxes, are excluded from net
	income and shown as a separate component of other comprehensive
	income until realized in net income upon sale or upon complete
	liquidation of the investment in the foreign entity.

67



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)




|  |                                                                                                                                                                                                                                                                                                                                                                                                                                             
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Holding Gains and Losses on Available-for-Sale
	Securities Unrealized holding gains and losses
	resulting from temporary changes in the fair value of MCNs
	available-for-sale securities are excluded from net income and
	reported as a separate component of other comprehensive income
	until realized in net income upon sale. If a fair value decline
	is judged to be other than temporary, the decline is recorded to
	net income.

Property, Plant and Equipment Property, plant
and equipment, excluding E&P property, is stated at cost and
includes amounts for labor, materials, overhead and an allowance
for funds used during construction. Unit of production
depreciation and depletion is used for certain Gas Distribution
production and transmission property. All other property, plant
and equipment of MCN, excluding E&P property, is depreciated
over its useful life using the straight-line method. Depreciation
 rates vary by class of property.

The ratio of the provision for depreciation and depletion to the
average cost of depreciable property is as follows:



---

|                       |  |      |      |      |  |      |      |   |  |  |      |  
|---------------------- |  | ---- | ---- | ---- |  | ---- | ---- | - |  |  | ---- | -
|                       |  | 1999 |      | 1998 |  | 1997
|                       |  |      |      |      |  |     
|Pipelines & Processing |  |      | 4.2  | %    |  |      | 3.4  | % |  |  | 3.5  | %
|                      
|                      
|                      
|                      
|Gas Distribution       |  |      | 3.5  | %    |  |      | 3.5  | % |  |  | 4.1  | %
|                      
|                      
|                      
|                      
|Other                  |  |      | 12.4 | %    |  |      | 12.2 | % |  |  | 12.3 | %



---

Long-Lived Assets In accordance with SFAS
No. 121, Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed
Of,MCN reviews its long-lived assets to be held and
used for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully
recoverable. MCN also reviews long-lived assets to be disposed of
 to determine if the assets carrying amount is in excess of
 its fair value less the cost to sell.

Allowance for Funds Used During Construction 
Gas Distribution capitalizes an allowance for both debt and
equity funds used during construction in the cost of major
additions to plant. Diversified Energy also capitalizes interest
on debt funds used during construction. The total amount
capitalized was $8,929,000, $19,938,000 and $18,190,000 in 1999,
1998 and 1997, respectively.

Income Taxes and Investment Tax Credits Tax
Benefits Amortizable to Customers represents the net revenue
equivalent of the difference in property-related accumulated
deferred income taxes computed in accordance with SFAS
No. 109, Accounting for Income Taxes,as
compared to the amounts previously reflected in setting utility
rates. This amount is primarily due to current tax rates being
lower than the rates in effect when the original deferred taxes
were recorded and because of temporary differences, including
accumulated investment tax credits, for which deferred income
taxes were not previously recorded in setting utility rates.
These net tax benefits are being amortized, in accordance with
the regulatory treatment, over the life of the related plant as
the related temporary differences reverse.

Investment tax credits relating to Gas Distribution property
placed into service were deferred and are being credited to
income over the life of the related property. Investment tax
credits relating to

68



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Diversified Energy operations were recorded to income in the year
 the related property was placed into service.

Deferred Debt Costs In accordance with MPSC
regulations, MichCon defers reacquisition and unamortized
issuance costs of reacquired long-term debt when such debt is
refinanced. These costs are amortized over the term of the
replacement debt.

Consolidated Statement of Cash Flows For
purposes of this statement, MCN considers all highly liquid
investments, excluding restricted investments, purchased with a
maturity of three months or less to be cash equivalents.

Other cash and non-cash investing and financing activities for
the years ended December 31 were as follows:




|                                            |                                                       |      |   |         |  |      |   |         |  |  |   |        | 
|------------------------------------------- | ----------------------------------------------------- | ---- | - | ------- |  | ---- | - | ------- |  |  | - | ------ | 
|                                            |                                                       | 1999 |   | 1998    |  | 1997
|(in Thousands)                              |                                                       |      |   |         |  |     
|Cash Paid During the Year For               |                                                       |      |   |         |  |      |   |         |  |  |   |       
|                                           
|                                           
|                                           
|                                           
|                                            | Interest, net of amounts capitalized                  |      | $ | 128,535 |  |      | $ | 117,162 |  |  | $ | 97,659 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Federal income taxes                                  |      |   | 3,550   |  |      |   | 12,175  |  |  |   | 30,300 | 
|Non-cash Investing and Financing Activities |                                                       |      |   |         |  |      |   |         |  |  |   |       
|                                           
|                                           
|                                           
|                                           
|                                            | Common stock and performance units                    |      | $ | 2,043   |  |      | $ | 288     |  |  | $ | 19,188 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Equity issued for acquisitions                        |      |   |        |  |      |   | 5,409   |  |  |   |       | 
|                                           
|                                           
|                                           
|                                           
|                                            | Foreign currency translation adjustment, net of taxes |      |   | 399     |  |      |   | 6,554   |  |  |   | 6,292  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Unrealized losses on securities, net of taxes         |      |   | 1,159   |  |      |   | 6,490   |  |  |   | 1,184  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Sale of investment in joint ventures                  |      |   |        |  |      |   |        |  |  |   | 8,562  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Yield enhancement and contract costs                  |      |   |        |  |      |   |        |  |  |   | 2,702  | 
|                                           
|                                           
|                                           
|                                           
|                                            | Property purchased under capital leases               |      |   |        |  |      |   |        |  |  |   | 1,303  | 




2.  MERGER AGREEMENT WITH DTE ENERGY
COMPANY

MCN and DTE Energy Company (DTE) have signed a definitive
merger agreement, dated October 4, 1999, under which DTE
will acquire all outstanding shares of MCN common stock. Under
the terms of the agreement, MCN shareholders will have the right
to elect to receive either $28.50 in cash or 0.775 shares of DTE
common stock in exchange for each share of MCN common stock that
they hold. The acquisition of shares is subject to an allocation
and proration that is intended to result in 45% of the MCN shares
 being converted into shares of DTE common stock and 55% being
converted into cash.

The boards of directors and the shareholders of both companies
have approved the proposed merger. The transaction is subject to
regulatory approvals and other customary merger conditions. The
transaction is expected to close in mid-2000 and will be
accounted for as a purchase by DTE. The combined company, which
will be named DTE Energy Company and headquartered in Detroit,
will be the largest electric and gas utility in Michigan.

DTE is a diversified energy provider. Its principal subsidiary is
 The Detroit Edison Company, Michigans largest electric
utility serving 2.1 million customers in southeastern Michigan.
DTEs

69



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


non-regulated subsidiaries and ventures sell methane gas from
landfills, coal, metallurgical coke and other energy-related
products and services.

As a result of the pending merger, MCN has incurred
merger-related costs which include legal, accounting, consulting,
 employee benefit and other expenses. These costs had the effect
of decreasing 1999 earnings by $34,855,000 pre-tax ($22,656,000
net of taxes).

Furthermore, as part of the merger agreement, MCN has agreed to
sell its interest in five power projects, four of which are power
 projects that are defined as Qualifying Facilities
under the Public Utility Regulatory Policies Act of 1978, as
amended. This act limits the interest in a project that can be
owned by electric companies while maintaining the projects
status as a Qualifying Facility. In the first quarter
 of 2000, MCN completed the sale of its 23% interest in the
Midland Cogeneration Venture, a 1,370 megawatt (MW) cogeneration
facility located in Michigan, and its 33 1/3% interest in
the Carson Cogeneration facility, a 42 MW cogeneration plant
located in California. MCN has reached an agreement to sell its
50% interest in the Michigan Power Project, a 123 MW cogeneration
 plant located in Michigan, and its 50% interest in the Ada
Cogeneration facility, a 30 MW cogeneration plant located in
Michigan. The Michigan Power Project and Ada Cogeneration sales
are expected to be completed in the second quarter of 2000.
Additionally, MCN has reached an agreement in principle to sell
its 95% interest in the Cobisa-Person facility, a 140 MW
power plant in New Mexico that is currently under construction.
The sale is subject to Federal Energy Regulatory Commission
(FERC) approval.

3.  UNUSUAL CHARGES

During 1999 and 1998, MCN recorded several unusual charges,
consisting of property write-downs, losses on the sale of
properties, investment and contract losses and restructuring
charges. A discussion of each unusual charge by segment follows:

a.  Pipelines & Processing

Property Write-Downs:


70



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


During 1998, MCN also recorded an impairment loss of $3,899,000
pre-tax ($2,534,000 net of taxes) relating to an acquired
out-of-service pipeline in Michigan. MCN reviewed the business
alternatives for this asset and determined that its development
is unlikely. Accordingly, MCN recorded an impairment loss equal
to the carrying value of this asset.

b.  Electric Power

Property Write-Downs:


Restructuring Charge:During 1998, MCN recorded a
$2,470,000 pre-tax ($1,605,000 net of taxes) restructuring charge
 related to its decision to exit certain international power
projects.

c.  Energy Marketing

Loss on Contracts:


d.  Exploration & Production

Property Write-Downs:


During 1999, MCN also recorded a $2,340,000 pre-tax ($1,521,000
net of taxes) write-down relating to unproved property which is
not included in the full cost pool. An impairment loss was
recorded representing the amount by which the carrying value
exceeded the appraised value of the property.

During 1998, MCN recognized write-downs of its gas and oil
properties totaling $416,977,000 pre-tax ($271,035,000 net of
taxes). The write-downs were also the result of MCNs
capitalized exploration and production costs exceeding the full
cost ceiling.

Losses on Sale of Properties:During 1999, MCN recognized
losses from the sale of its Western, Midcontinent/ Gulf Coast and
 Appalachian E&P properties totaling $81,989,000 pre-tax
($53,293,000 net of taxes).

Loss on Investment:During 1999, MCN recognized a
$7,456,000 pre-tax ($4,846,000 net of taxes) loss from the
write-down of an investment in the common stock of an E&P
company. MCN had also recognized a $6,135,000 pre-tax ($3,987,000
 net of taxes) loss from the write-down of this investment during
 1998. The losses were due to declines in the fair value of the
securities that are not considered temporary. MCN has no carrying
 value in this investment after the write-downs.

71



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


e.  Corporate & Other

Restructuring Charge:


f.  Gas Distribution

Property Write-Downs:


Loss on Investment:During 1998, MCN also recorded an
$8,500,000 pre-tax ($5,525,000 net of taxes) loss from the
write-down of an investment in a Missouri gas distribution
company. The write-down represents the amount by which the
carrying value exceeded the estimated fair value of the
investment.

4.  ACQUISITIONS AND DISPOSITIONS

a.  Pipelines & Processing



In December 1999, MCN sold its four coal fines plants that
received in-service determination letters to DTE in
an arms-length transaction that is independent of the pending
merger. The sales price will depend on total production
performance of the four plants. DTE made an initial payment of
$45,000,000 and this payment will be adjusted up to $152,000,000
or down to zero based on the results of a 36-month production
test period. MCN has deferred recognizing any gain on this sale
pending the result of the test period.

In March 2000, MCN sold its 50% interest in the Cardinal
States Gathering Company for approximately $60,000,000.

b.  Electric Power

International Facilities:


In 1997, MCN acquired an approximate 65% interest in Bhote Koshi
Power Company, a partnership that is constructing a 36 MW
hydroelectric power plant in Nepal. Construction of the plant
began in early 1997 and is scheduled to be completed in mid-2000.
 At December 31, 1999,

72



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


MCN had paid $10,720,000 of its total equity commitment of
$20,100,000. The remaining equity commitment balance will be paid
 in 2000. The investment is accounted for under the equity
method.

In 1997, MCN acquired a 40% interest in the common equity of
Torrent Power Limited (TPL), a joint venture that holds minority
interests in electric distribution companies and power generation
 facilities located in the state of Gujarat, India. In 1997 and
1998, MCN acquired preference shares in TPL, bringing the total
cost of the acquisitions to $121,200,000. In August 1999, MCN
sold its interest in TPL for approximately $130,000,000,
resulting in an immaterial gain.

Qualifying and Other Facilities:As part of the merger
agreement, MCN has agreed to sell its interest in five power
projects, four of which are Qualifying Facilities as
defined by the Public Utility Regulatory Policies Act of 1978, as
 amended (Note 2).

In 1997, MCN acquired an 18% general partnership interest in
Midland Cogeneration Venture Limited Partnership (MCV) and
acquired an additional 5% general partnership interest in 1998.
MCV is a partnership that leases and operates a 1,370 MW
cogeneration facility in Midland, Michigan.

In January 2000, MCN sold its 23% ownership in MCV for
approximately $105,000,000, resulting in an immaterial gain.
Under the terms of the sales agreement, if MCN does not merge
with DTE, MCN may reacquire its 23% interest in MCV.

In February 2000, MCN reached an agreement to sell its 50%
interest in the Michigan Power Project, a 123 MW cogeneration
plant located in Ludington, Michigan and its 50% interest in the
Ada Cogeneration facility, a 30 MW cogeneration plant
located in Ada, Michigan. The sales are expected to be completed
in the second quarter of 2000 resulting in a pre-tax gain
totaling approximately $40,000,000.

In March 2000, MCN sold its 33 1/3% interest in the
Carson Cogeneration facility, a 42 MW cogeneration plant located
in Carson, California for $3,000,000, resulting in a pre-tax gain
 of approximately $3,600,000 ($2,340,000 net of taxes).

In February 2000, MCN reached an agreement in principle to
sell its 95% interest in the Cobisa-Person facility, a 140 MW
power plant in New Mexico that is currently under construction.
The sale is subject to FERC approval.

c.  Exploration & Production



5.  ACCOUNTING FOR START-UP ACTIVITIES

In January 1999, MCN adopted Statement of Position
(SOP) 98-5, Reporting on the Costs of Start-up
Activities, issued by the Accounting Standards
Executive Committee of the American Institute of Certified Public
 Accountants. SOP 98-5 requires start-up and organizational
costs to be expensed as incurred. This change in accounting
principle resulted in the write-off of start-up and

73



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


organization costs capitalized as of December 31, 1998. The
cumulative effect of the change was to decrease 1999 earnings by
$4,418,000 pre-tax ($2,872,000 net of taxes).

6.  INVESTMENTS IN AND ADVANCES TO JOINT
VENTURES

MCN has equity interests in several joint ventures involved in
the following businesses: Pipelines & Processing 
10 1/2% to 97.4% owned; Electric Power  23% to
95% owned; Energy Marketing  10% to 50% owned; Gas
Distribution  47 1/2% owned; and Real Estate
& Other  33% to 50% owned. MCNs share of
undistributed earnings in these joint ventures totaled
$67,282,000 at December 31, 1999. Refer to
Note 4  Acquisitions and Dispositions
 for a discussion of Pipelines & Processing and Electric
Power joint ventures which were sold subsequent to
December 31, 1999 or are in the process of being sold.

The following is the combined summarized financial information of
 the joint ventures. No provision for income taxes has been
included, since income taxes are paid directly by the joint
venture participants.




|                                          |                        |      |           |         |   |      |           |         |   |   |           |         | 
|----------------------------------------- | ---------------------- | ---- | --------- | ------- | - | ---- | --------- | ------- | - | - | --------- | ------- | 
|                                          |                        | 1999 |           | 1998    |   | 1997
|(in Thousands)                            |                        |      |           |         |   |     
|                                          |                        |      |           |         |   |     
|                                         
|                                         
|                                         
|                                         
|Operating Revenues                        |                        | $    | 2,177,614 |         |   | $    | 2,628,822 |         |   | $ | 1,598,208 |        
|                                         
|                                         
|                                         
|                                         
|Operating Income                          |                        |      | 294,252   |         |   |      | 385,821   |         |   |   | 348,544   |        
|                                         
|                                         
|                                         
|                                         
|Income Before Taxes                       |                        |      | 140,644   |         |   |      | 205,961   |         |   |   | 197,453   |        
|                                         
|                                         
|                                         
|                                         
|MCNs Share of Operating Revenues         |                        |      |           |         |   |      |           |         |   |   |           |        
|                                         
|                                         
|                                         
|                                         
|                                          | Pipelines & Processing |      | $         | 359,513 |   |      | $         | 276,613 |   |   | $         | 144,823 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Electric Power         |      |           | 196,087 |   |      |           | 315,516 |   |   |           | 168,051 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Energy Marketing       |      |           | 372,112 |   |      |           | 317,342 |   |   |           | 249,954 | 
|                                         
|                                         
|                                         
|                                         
|                                          | Real Estate & Other    |      |           | 6,790   |   |      |           | 12,436  |   |   |           | 7,740   | 
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        
|                                          |                        | $    | 934,502   |         |   | $    | 921,907   |         |   | $ | 570,568   |        
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        
|MCNs Share of Operating Income (Loss)    |                        |      |           |         |   |      |           |         |   |   |           |        
|                                         
|                                         
|                                         
|                                         
|                                          | Pipelines & Processing |      | $         | 14,251  |   |      | $         | 15,714  |   |   | $         | 27,485  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Electric Power         |      |           | 63,669  |   |      |           | 73,590  |   |   |           | 48,671  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Energy Marketing       |      |           | 3,260   |   |      |           | 6,214   |   |   |           | 9,933   | 
|                                         
|                                         
|                                         
|                                         
|                                          | Real Estate & Other    |      |           | (176    | ) |      |           | (136    | ) |   |           | 645     | 
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        
|                                          |                        | $    | 81,004    |         |   | $    | 95,382    |         |   | $ | 86,734    |        
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        
|MCNs Share of Income (Loss) Before Taxes |                        |      |           |         |   |      |           |         |   |   |           |        
|                                         
|                                         
|                                         
|                                         
|                                          | Pipelines & Processing |      | $         | 24,711  |   |      | $         | 29,987  |   |   | $         | 28,551  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Electric Power         |      |           | 26,651  |   |      |           | 28,546  |   |   |           | 12,655  | 
|                                         
|                                         
|                                         
|                                         
|                                          | Energy Marketing       |      |           | 1,738   |   |      |           | 4,681   |   |   |           | 7,379   | 
|                                         
|                                         
|                                         
|                                         
|                                          | Real Estate & Other    |      |           | (714    | ) |      |           | (989    | ) |   |           | 7,074   | 
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        
|                                          |                        | $    | 52,386    |         |   | $    | 62,225    |         |   | $ | 55,659    |        
|                                          |                        |      |           |         |   |      |           |         |   |   |           |        




74



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)




---

|                                                   |                        |      |           |           |  |   |           |           | 
|-------------------------------------------------- | ---------------------- | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                                   |                        | 1999 |           | 1998     
|                                                   |                        |      |           |          
|(in Thousands)                                     |                        |      |           |          
|                                                   |                        |      |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|Assets                                             |                        |      |           |           |  |   |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current assets         |      | $         | 751,546   |  |   | $         | 612,023   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Noncurrent assets      |      |           | 3,901,363 |  |   |           | 3,959,716 | 
|                                                   |                        |      |           |           |  |   |           |          
|                                                   |                        | $    | 4,652,909 |           |  | $ | 4,571,739 |          
|                                                   |                        |      |           |           |  |   |           |          
|Liabilities and Joint Ventures Equity             |                        |      |           |           |  |   |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Current liabilities    |      | $         | 554,218   |  |   | $         | 439,357   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Noncurrent liabilities |      |           | 2,407,870 |  |   |           | 2,300,825 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Joint ventures equity |      |           | 1,690,821 |  |   |           | 1,831,557 | 
|                                                   |                        |      |           |           |  |   |           |          
|                                                   |                        | $    | 4,652,909 |           |  | $ | 4,571,739 |          
|                                                   |                        |      |           |           |  |   |           |          
|MCNs Share of Total Assets                        |                        |      |           |           |  |   |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Pipelines & Processing |      | $         | 701,498   |  |   | $         | 568,944   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Electric Power         |      |           | 713,473   |  |   |           | 722,038   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Energy Marketing       |      |           | 73,527    |  |   |           | 86,135    | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Gas Distribution       |      |           | 23,230    |  |   |           | 23,149    | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Real Estate & Other    |      |           | 34,699    |  |   |           | 35,921    | 
|                                                   |                        |      |           |           |  |   |           |          
|                                                   |                        | $    | 1,546,427 |           |  | $ | 1,436,187 |          
|                                                   |                        |      |           |           |  |   |           |          
|MCNs Share of Joint Ventures Equity              |                        |      |           |           |  |   |           |          
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Pipelines & Processing |      | $         | 473,001   |  |   | $         | 434,310   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Electric Power         |      |           | 121,667   |  |   |           | 191,627   | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Energy Marketing       |      |           | 16,041    |  |   |           | 27,748    | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Gas Distribution       |      |           | 2,898     |  |   |           | 7,832     | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Real Estate & Other    |      |           | 17,064    |  |   |           | 17,810    | 
|                                                   |                        |      |           |           |  |   |           |          
|                                                   |                        |      | 630,671   |           |  |   | 679,327   |          
|                                                  
|                                                  
|                                                  
|                                                  
|Goodwill and Other(1)                              |                        |      | 133,301   |           |  |   | 123,904   |          
|                                                   |                        |      |           |           |  |   |           |          
|MCNs Investment in and Advances to Joint Ventures |                        | $    | 763,972   |           |  | $ | 803,231   |          
|                                                   |                        |      |           |           |  |   |           |          




|    |                                                                                                                                                                                                                                                               
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Primarily represents differences between
	MCNs carrying value and its share of the joint
	ventures underlying equity interest that is amortized over
	the estimated useful lives of the related assets, which on a
	weighted average basis equaled 28 years.

7.  REGULATORY MATTERS

a.  Regulatory Assets and Liabilities

Accounting for the
Effects of Certain Types of Regulation.


75



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The following regulatory assets and liabilities were reflected in
 the Consolidated Statement of Financial Position as of
December 31:



---

|                       |                                         |      |         |         |  |   |         |         | 
|---------------------- | --------------------------------------- | ---- | ------- | ------- |  | - | ------- | ------- | 
|                       |                                         | 1999 |         | 1998   
|(in Thousands)         |                                         |      |         |        
|                       |                                         |      |         |        
|Regulatory Assets      |                                         |      |         |         |  |   |         |        
|                      
|                      
|                      
|                      
|                       | Deferred environmental costs (Note 13c) |      | $       | 31,173  |  |   | $       | 30,773  | 
|                      
|                      
|                      
|                      
|                       | Unamortized loss on retirement of debt  |      |         | 15,241  |  |   |         | 15,548  | 
|                      
|                      
|                      
|                      
|                       | Other                                   |      |         | 811     |  |   |         | 804     | 
|                       |                                         |      |         |         |  |   |         |        
|                       |                                         | $    | 47,225  |         |  | $ | 47,125  |        
|                       |                                         |      |         |         |  |   |         |        
|Regulatory Liabilities |                                         |      |         |         |  |   |         |        
|                      
|                      
|                      
|                      
|                       | Tax benefits amortizable to customers   |      | $       | 136,236 |  |   | $       | 130,120 | 
|                      
|                      
|                      
|                      
|                       | Deferred gas cost recovery revenues     |      |         |        |  |   |         | 14,980  | 
|                      
|                      
|                      
|                      
|                       | Other                                   |      |         | 88      |  |   |         |        | 
|                       |                                         |      |         |         |  |   |         |        
|                       |                                         | $    | 136,324 |         |  | $ | 145,100 |        
|                       |                                         |      |         |         |  |   |         |        




Gas Distribution currently has regulatory precedents and orders
in effect that provide for the probable recovery or refund of its
 regulatory assets and liabilities. Future regulatory changes or
changes in the competitive environment could result in Gas
Distribution discontinuing the application of SFAS No. 71
for all or part of its business and require the write-off of the
portion of any regulatory asset or liability that was no longer
probable of recovery or refund. If MCN were to have discontinued
the application of SFAS No. 71 for all of its operations as
of December 31, 1999, it would have had an extraordinary
non-cash increase to net income of approximately $57,900,000.
Management believes that currently available facts support the
continued application of SFAS No. 71.

b.  Regulatory Reform Plan



The Plan also includes a comprehensive experimental three-year
customer choice program, which is subject to annual caps on the
level of participation. The customer choice program began in
April 1999, with approximately 70,000 customers choosing to
purchase natural gas from suppliers other than MichCon. Plan
years begin April 1 of each year, and the number of customers
allowed to participate in the plan was limited to 75,000 in 1999,
 and is limited to 150,000 in 2000 and 225,000 in 2001. There is
also a volume limitation on commercial and industrial
participants. The volume limitation for these participants was 10
 Bcf in 1999, and is 20 Bcf in 2000 and 30 Bcf in 2001. MichCon
will continue to transport and deliver the gas to the
customers premises at prices that

76



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


generate favorable margins. Various parties have challenged the
MPSCs approval of the Plan. While management believes the
Plan will be upheld, there can be no assurance as to the outcome.

c.  Proposed Legislation



d.  Gas Cost Recovery Proceedings



In February 1999, MichCon filed its final GCR reconciliation
 case covering gas costs incurred during 1998, which indicates an
 overrecovery of $18,000,000, including interest. Management
believes that 1998 gas costs were reasonable and prudent and that
 the MPSC should approve the gas costs incurred. However,
management cannot predict the outcome of this proceeding. During
the first quarter of 1999, MichCon refunded the overrecovery to
customers as a reduction in gas sales rates.

e.  Other Rate Matters



8.  GAS IN INVENTORY

Inventory gas is priced on a last-in, first-out
(LIFO) basis. At December 31, 1999, the replacement
cost exceeded the $180,372,000 LIFO cost by $147,561,000. At
December 31, 1998, the replacement cost exceeded the
$147,387,000 LIFO cost by $152,961,000.

77



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)




|   |                                             
|-- | --------------------------------------------
|9. | CREDIT FACILITIES, SHORT-TERM BORROWINGS AND

LONG-TERM DEBT


Detailed information on long-term debt, excluding current
requirements, is as follows:




|                                                        |                        |      |           |         |  |   |           |         | 
|------------------------------------------------------- | ---------------------- | ---- | --------- | ------- |  | - | --------- | ------- | 
|                                                        |                        | 1999 |           | 1998   
|(in Thousands)                                          |                        |      |           |        
|First Mortgage Bonds, interest payable semi-annually    |                        |      |           |         |  |   |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 5 3/4% series due 2001 |      | $         | 20,000  |  |   | $         | 40,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 8% series due 2002     |      |           | 17,314  |  |   |           | 17,314  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.72% series due 2003  |      |           | 4,150   |  |   |           | 4,150   | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.80% series due 2003  |      |           | 15,850  |  |   |           | 15,850  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 9 1/8% series due 2004 |      |           |        |  |   |           | 18,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7.15% series due 2006  |      |           | 40,000  |  |   |           | 40,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7.21% series due 2007  |      |           | 30,000  |  |   |           | 30,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7.06% series due 2012  |      |           | 40,000  |  |   |           | 40,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 8 1/4% series due 2014 |      |           | 80,000  |  |   |           | 80,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7.60% series due 2017  |      |           | 14,932  |  |   |           | 14,980  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7 1/2% series due 2020 |      |           | 29,352  |  |   |           | 29,641  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 9 1/2% series due 2021 |      |           | 40,000  |  |   |           | 40,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6 3/4% series due 2023 |      |           | 15,982  |  |   |           | 16,617  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7% series due 2025     |      |           | 40,000  |  |   |           | 40,000  | 
|Remarketable Securities, interest payable semi-annually |                        |      |           |         |  |   |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.375% series due 2008 |      |           | 100,000 |  |   |           | 100,000 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.30% series due 2011  |      |           | 100,000 |  |   |           | 100,000 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.35% series due 2012  |      |           | 100,000 |  |   |           | 100,000 | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.45% series due 2038  |      |           | 75,000  |  |   |           | 75,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.20% series due 2038  |      |           | 75,000  |  |   |           | 75,000  | 
|Senior Notes, interest payable quarterly                |                        |      |           |         |  |   |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.85% series due 2038  |      |           | 54,863  |  |   |           |        | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.85% series due 2039  |      |           | 55,000  |  |   |           |        | 
|Medium-Term Notes, interest payable semi-annually       |                        |      |           |         |  |   |           |        
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.03% series due 2001  |      |           | 60,000  |  |   |           | 60,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.89% series due 2002  |      |           | 90,000  |  |   |           | 90,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 6.32% series due 2003  |      |           | 60,000  |  |   |           | 60,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|                                                        | 7.12% series due 2004  |      |           | 60,000  |  |   |           | 60,000  | 
|                                                       
|                                                       
|                                                       
|                                                       
|Commercial Paper and Bank Borrowings                    |                        |      | 200,000   |         |  |   | 107,656   |        
|                                                       
|                                                       
|                                                       
|                                                       
|Project Loan Due 2006, interest payable quarterly       |                        |      | 10,560    |         |  |   | 12,320    |        
|                                                       
|                                                       
|                                                       
|                                                       
|Long-Term Capital Lease Obligations                     |                        |      | 3,482     |         |  |   | 5,345     |        
|                                                       
|                                                       
|                                                       
|                                                       
|Other Long-Term Debt                                    |                        |      | 17,413    |         |  |   | 25,874    |        
|                                                       
|                                                       
|                                                       
|                                                       
|Net Unamortized Premium                                 |                        |      | 8,719     |         |  |   | 9,421     |        
|                                                        |                        |      |           |         |  |   |           |        
|                                                        |                        | $    | 1,457,617 |         |  | $ | 1,307,168 |        
|                                                        |                        |      |           |         |  |   |           |        




Substantially all of the net utility properties of MichCon,
totaling approximately $1,243,000,000, are pledged as security
for the payment of outstanding first mortgage bonds.

78



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Maturities and sinking fund requirements during the next five
years for long-term debt outstanding at December 31, 1999
are $27,000,000 in 2000, $86,600,000 in 2001, $113,700,000 in
2002, $86,000,000 in 2003 and $65,600,000 in 2004.

Diversified Energy  At December 31, 1999,
MCNEE had credit lines permitting borrowings of up to
$200,000,000 under a 364-day revolving credit facility and up to
$200,000,000 under a three-year revolving credit facility. The
364-day revolving credit facility was renewed in July 1999.
The three-year revolving credit facility expires in
July 2001. These facilities support MCNEEs
$400,000,000 commercial paper program. MCNEE usually issues
commercial paper in lieu of an equivalent amount of borrowings
under these lines of credit. Commercial paper and bank borrowings
 outstanding at December 31, 1999 and 1998 totaling
$152,350,000 and $118,000,000, respectively, were classified as
short term. The remaining 1999 and 1998 commercial paper and bank
 borrowings of $200,000,000 and $107,656,000, respectively, were
classified as long term. Commercial paper and bank borrowings
outstanding as of December 31, 1999 and 1998 were at
weighted average interest rates of 6.7% and 6.4%, respectively.
Fees are paid to compensate banks for lines of credit.

In 1999, MCN entered into a $290,000,000 revolving credit
agreement that expires in July 2000. The revolving credit
agreement had an outstanding balance of $200,000,000 at
December 31, 1999 and was at a weighted average interest
rate of 7.3%.

In 1998, MCNEE issued a total of $300,000,000 of remarketable
debt securities with various interest rates and maturity dates.
These securities are senior unsecured obligations of MCNEE and
are subject to an MCN support agreement. The securities are
structured such that at a specified future remarketing date the
remarketing agents may elect to remarket the securities whereby
the annual interest rate will be reset. MCNEE received option
premiums in return for the remarketing option. If the remarketing
 agents elect not to remarket the securities, MCNEE will be
required to repurchase the securities at their principal amounts.
 The option premiums received, net of financing costs incurred,
totaled $5,709,000 and are being amortized to income over the
life of the debt. The remarketing dates are in April 2001,
2002 and 2003.

MCNEE has variable interest rate swap agreements with a combined
notional amount of $80,000,000 which mature in 2001. The swap
agreements effectively reduced the average cost of related debt
from 6.4% to 5.8% for the year ended December 31, 1999.

Gas Distribution  At December 31, 1999,
MichCon had credit lines permitting borrowings of up to
$150,000,000 under a 364-day revolving credit facility and up to
$150,000,000 under a three-year revolving credit facility. The
364-day revolving credit facility was renewed in July 1999.
The three-year revolving credit facility expires in
July 2001. MichCon issues commercial paper in lieu of an
equivalent amount of borrowings under these lines of credit.
Commercial paper outstanding at December 31, 1999 and 1998
totaled $235,870,000 and $218,447,000 and was at weighted average
 interest rates of 6.4% and 5.6%, respectively. This debt is
classified as short term. Fees are paid to compensate banks for
lines of credit.

In 1999, MichCon issued $55,000,000 of 6.85% senior secured
notes, due June 2038, and $55,000,000 of 6.85% senior secured
notes, due June 2039. These notes are fall-away
mortgage debt and, as such, are secured debt as long as
MichCons other first mortgage bonds are outstanding and
become senior unsecured debt thereafter. The notes are insured by
 a financial guaranty

79



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


insurance policy and are rated AAA or its equivalent by the major
 rating agencies. The notes are redeemable at par on or after
June 1, 2004.

In 1999, MichCon redeemed $18,000,000 of 9.125% first mortgage
bonds, which were due September 2004.

In 1998, MichCon issued a total of $150,000,000 of remarketable
debt securities with various interest rates. These securities are
 fall-away mortgage debt and are structured such that
 the interest rates of the issues can be reset at various
remarketing dates over the life of the debt. The initial
remarketing dates are in June 2003 and 2008. MichCon
received option premiums in return for granting options to
underwriters to reset the interest rate for a period of ten years
 at the initial remarketing dates. The option premiums received,
net of financing costs incurred, totaled $3,052,000 and are being
 amortized to income over the initial interest and corresponding
option periods. If the underwriters elect not to exercise their
reset options, the securities become subject to the remarketing
feature or may be redeemed by MichCon at par. If MichCon and the
remarketing agent cannot agree on an interest rate or the
remarketing agent is unable to remarket the securities, MichCon
will be required to repurchase the securities at their principal
amounts.

During 1997, non-utility subsidiaries of MichCon borrowed
$40,000,000 under a nonrecourse credit agreement. Under terms of
the agreement, certain alternative variable interest rates are
available at the borrowers option during the life of the
agreement. Quarterly principal payments commenced in 1997, with a
 final installment due November 2005. The loan is secured by a
pledge of stock of the borrowers and a security interest in
certain of their assets. MichCon may be required to support the
credit agreement through limited capital contributions to the
subsidiaries if certain cash flow and operating targets are not
met. At December 31, 1999 and 1998, $21,900,000 and
$29,200,000 were outstanding at weighted average interest rates
of 6.6% and 5.8%, respectively.

MichCon has variable interest rate swap agreements with notional
principal amounts aggregating $92,000,000 in connection with its
first mortgage bonds. Swap agreements of $40,000,000 through
May 2002 have reduced the average cost of the related debt
from 7.3% to 5.9% for the year ended December 31, 1999. Swap
 agreements of $40,000,000 through May 2005 have reduced the
 average cost of the related debt from 7.1% to 5.5% for the year
ended December 31, 1999. Swap agreements of $12,000,000
through April 2000 have reduced the average cost of the
related debt from 8.3% to 4.1% for the year ended
December 31, 1999. A non-utility subsidiary of MichCon has
an interest rate swap agreement on the $12,333,000 outstanding
balance of its project loan agreement at December 31, 1999
that effectively fixes the interest rate at 7.5% through
February 2003.

10.  PREFERRED AND HYBRID SECURITIES



|   |                                                                           
|-- | --------------------------------------------------------------------------
|a. | MCN-Obligated Mandatorily Redeemable Preferred Securities of
	Subsidiaries



80



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Summarized information for MCN-obligated mandatorily redeemable
preferred securities of subsidiaries holding solely debentures of
 MCN is as follows:




|                                                    |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|--------------------------------------------------- | ------------------------------------------------------------ | -------------------------------- | ------- | ----------- |  | ----------- | ------- | ---------- |  | ---- | - | ----- |  |  |  | ---- |  |  |  | ---- |  | 
|                                                    |                                                              |                                  |         |             |  |             |         |           
|                                                    |                                                              | December 31,                     |         | Liquidation |  | Maturity of |         | Earliest  
|                                                    |                                                              |                                  |         | Value       |  | Underlying  |         | Redemption
|                                                    |                                                              | 1999                             |         | 1998        |  | Per Share   |         | Security   |  | Date
|(in Thousands of Dollars, Except Per Share Amounts) |                                                              |                                  |         |             |  |             |         |            |  |     
|                                                    |                                                              |                                  |         |             |  |             |         |            |  |     
|MCN Financing I                                     |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 8 5/8% Trust Originated Preferred Securities                 |                                  | $       | 77,145      |  |             | $       | 77,068     |  |      | $ | 25    |  |  |  | 2036 |  |  |  | 2001 | 
|                                                    |                                                              | (3,200,000 preferred securities) |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              | Dividends payable quarterly.     |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|MCN Financing II                                    |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 8 5/8% Trust Preferred Securities                            |                                  |         | 96,585      |  |             |         | 96,669     |  |      |   | 25    |  |  |  | 2038 |  |  |  | 2003 | 
|                                                    |                                                              | (4,000,000 preferred securities) |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              | Dividends payable quarterly.     |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|MCN Financing VI                                    |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 6.85% Single Point Remarketed Reset Capital Securities       |                                  |         |            |  |             |         | 99,397     |  |      |   | 1,000 |  |  |  |     |  |  |  |     | 
|                                                    |                                                              | (100,000 preferred securities)   |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              | Dividends payable semi-annually. |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|MCN Michigan Ltd. Partnership                       |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 9 3/8% Redeemable Cumulative Preferred Securities,
	Series A |                                  |         | 96,942      |  |             |         | 96,819     |  |      |   | 25    |  |  |  | 2024 |  |  |  | 1999 | 
|                                                    |                                                              | (4,000,000 preferred securities) |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              | Dividends payable monthly.       |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|MCN Financing III                                   |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | 8% FELINE PRIDES                                             |                                  |         | 132,250     |  |             |         | 132,250    |  |      |   | 50    |  |  |  | 2002 |  |  |  | 2002 | 
|                                                    |                                                              | (2,645,000 FELINE PRIDES)        |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              | Dividends payable quarterly.     |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |      |  | 
|                                                    |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                    |                                                              | $                                | 402,922 |             |  | $           | 502,203 |            |  |      |   |       |  |  |  |      |  |  |  |     
|                                                    |                                                              |                                  |         |             |  |             |         |            |  |      |   |       |  |  |  |      |  |  |  |     




The preferred securities carry similar provisions as described
below.

The preferred securities allow MCN the right to extend interest
payment periods on the debentures and, as a consequence, dividend
 payments on the preferred securities can be deferred by the
trusts and partnership during any such interest payment period.
In the event that MCN exercises this right, MCN may not declare
dividends on its common stock.

In the event of default, holders of the preferred securities will
 be entitled to exercise and enforce the trusts and
partnerships creditor rights against MCN, which may include
 acceleration of the principal amount due on the debentures. MCN
has issued guaranties with respect to payments on the preferred
securities. These guaranties, when taken together with MCNs
 obligations under the debentures, the related indenture, and the
 trust and partnership documents, provide full and unconditional
guaranties of the trusts and partnerships obligations under
 the preferred securities to the extent of the funds available
therefor.

Financing costs for these issuances were deferred and are
reflected as a reduction in the carrying value of the preferred
securities. These costs are being amortized using the
straight-line method over the estimated lives of the related
securities.

81



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


In addition to the similar provisions previously discussed,
specific terms of the securities follow:



|  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 6.85% Single Point Remarketed Reset Capital Securities
	(SPRRCS)  MCN redeemed the 6.85% SPRRCS during
	1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| 
| | 8% FELINE PRIDES  Each security initially
	consists of a stock purchase contract and a preferred security of
	 MCN Financing III. Under each stock purchase contract, MCN
	is obligated to sell, and the FELINE PRIDES holder is obligated
	to purchase between 1.4132 and 1.7241 shares of MCN common stock
	on May 16, 2000 for $50. The exact number of MCN common
	shares to be sold is dependent on the market value of a share in
	May 2000, but will not be less than 3,737,988 or more than
	4,560,345 shares. MCN also is obligated to pay the FELINE PRIDES
	holders a quarterly contract adjustment payment at an annual rate
	 of .75% of the stated amount. MCN has recorded the present value
	 of the contract adjustment as a liability and a reduction to
	Common Shareholders Equity on MCNs Consolidated
	Statement of Financial Position. The liability is reduced as the
	contract adjustment payments are made.

Holders of the preferred securities are entitled to receive
cumulative dividends at an annual rate of 7.25% of the
liquidation preference value. The preferred securities are
pledged as collateral to secure the FELINE PRIDES holders
obligation to purchase MCN common stock under the stock purchase
contracts. Each holder has the right after issuance of the FELINE
 PRIDES to substitute for the preferred securities, zero coupon
U.S. Treasury securities maturing in May 2000. Each FELINE PRIDES
 holder has the option to use the preferred securities, treasury
securities or cash to satisfy the May 2000 purchase contract
commitment.

b.  Preferred Securities



c.  Enhanced PRIDES



11.  COMMON STOCK AND EARNINGS PER SHARE

a.  Common Stock



MCN has traditionally issued new shares of common stock pursuant
to its Direct Stock Purchase and Dividend Reinvestment Plan and
various employee benefit plans. The number of shares issued was
approximately 67,000 in 1999, 1,190,000 in 1998, and 1,165,000 in
 1997, generating net proceeds of $1,200,000, $20,200,000 and
$17,800,000, respectively. Beginning in February 1999, shares
issued under these plans are acquired by MCN through open market
purchases.

82



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


b.  Stock Incentive Plan



During 1999, 1998 and 1997, MCN granted 83,950, 293,116 and
245,340 performance units, respectively, with a weighted-average
grant date fair value of $17.25, $37.00 and $31.00 per unit,
respectively. The performance units are denominated in shares of
MCN common stock. Under the terms of the Plan, the initial number
 of performance units granted is based on total shareholder
return relative to the peer group during the previous three-year
period. Participants receive dividend equivalents on the units
granted. The initial grants are adjusted upward or downward based
 on total shareholder return relative to the peer group for the
subsequent three-year period. The final awards are then payable
in shares of common stock or can be deferred. Participants must
retain 50% of any common shares paid until certain stock
ownership guidelines are met. The deferred units must be retained
 by the participants until their employment with MCN ceases.

During 1999, in lieu of participating in the cash bonus plan,
certain employees of MCN were granted a total of 158,539 special
performance units with an average grant date fair value of
$18.875 per unit. The special award was made in order to better
focus the employees on the need to rebuild shareholder value and
to address retention concerns. The initial number of performance
units were to be adjusted upward or downward based on MCNs
total shareholder return in 1999 relative to its peer group.

In February 1999, MCN granted 650,410 stock options with a
grant date fair value of $2.67 per option. Each option allows the
 participant to purchase one share of MCN common stock at $17.25,
 which was the market price of MCNs common shares on the
grant date. The options were set to vest ratably over the three
years following date of grant and expire in the tenth year
following date of grant. During 1999, 64,820 options were
forfeited and 12,880 options were exercised resulting in 572,710
options outstanding at December 31, 1999.

MCN accounts for stock-based compensation awards under the fair
value-based method as prescribed under SFAS No. 123, Accounting for Stock-Based Compensation.
Accordingly, the costs of performance units and stock options
awarded, generally measured at their fair value on the grant
date, are recorded as compensation expense and Additional Paid-in
 Capital over their vesting period.

As a result of MCN shareholders approving the pending
merger with DTE (Note 2) on December 20, 1999,
provisions of the Stock Incentive Plan, as amended, provided for
the immediate vesting of all performance units and stock options
outstanding. The performance unit grants outstanding vested at no
 less than 100%, and were based on MCNs total shareholder
return relative to its peer group at the date of the
shareholders vote. Subject to the stock ownership
guidelines, participants had a one-time choice to have the value
of their options and performance units paid in cash at a weighted
 value of $25.00 per share. Accordingly, MCN adjusted 1999
compensation expense to reflect the December 1999 value and the
accelerated vesting of awards outstanding.

83



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Stock-based compensation cost recognized during 1999 for all
awards outstanding totaled $24,537,000. A stock-based
compensation benefit of $3,625,000 was recognized during 1998 for
 all awards outstanding as a result of a reduction in the number
of performance units expected to vest. Stock-based compensation
cost recognized during 1997 totaled $15,070,000. At
December 31, 1999, there were 5,143,730 shares available to
be issued under the Stock Incentive Plan.

c.  Shareholders Rights Plan



d.  Earnings Per Share



In 1999 and 1998, potentially dilutive securities have been
excluded from the diluted EPS calculation since their inclusion
would have been antidilutive. A reconciliation of both
calculations for 1997 is shown below.




|                                         |                                |               |          |               |  |            |        |       |  |   |       |   | 
|---------------------------------------- | ------------------------------ | ------------- | -------- | ------------- |  | ---------- | ------ | ----- |  | - | ----- | - | 
|                                         |                                | Income (Loss) |          | Weighted      |  | Earnings  
|                                         |                                | Before Acctg. |          | Average       |  | (Loss) Per
|                                         |                                | Change        |          | Common Shares |  | Share     
|(in Thousands, Except Per Share Amounts) |                                |               |          |               |  |           
|1999                                     |                                |               |          |               |  |            |        |       |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Basic and Dilutive Loss Per Share        |                                | $             | (27,976  | )             |  |            | 83,407 |       |  | $ | (.34  | )
|                                         |                                |               |          |               |  |            |        |       |  |   |       |  
|1998                                     |                                |               |          |               |  |            |        |       |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Basic and Dilutive Loss Per Share        |                                | $             | (286,468 | )             |  |            | 78,823 |       |  | $ | (3.63 | )
|                                         |                                |               |          |               |  |            |        |       |  |   |       |  
|1997                                     |                                |               |          |               |  |            |        |       |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|Basic Earnings Per Share                 |                                | $             | 133,229  |               |  |            | 72,887 |       |  | $ | 1.82  |  
|                                         |                                |               |          |               |  |            |        |       |  |   |       |  
|Effect of Dilutive Securities            |                                |               |          |               |  |            |        |       |  |   |       |  
|                                        
|                                        
|                                        
|                                        
|                                         | FELINE PRIDES                  |               |          | 1,688         |  |            |        | 1,021 |  |   |       |   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Enhanced PRIDES                |               |          | 222           |  |            |        | 623   |  |   |       |   | 
|                                        
|                                        
|                                        
|                                        
|                                         | Stock-based compensation plans |               |          |              |  |            |        | 904   |  |   |       |   | 
|                                         |                                |               |          |               |  |            |        |       |  |   |       |  
|Diluted Earnings Per Share               |                                | $             | 135,139  |               |  |            | 75,435 |       |  | $ | 1.79  |  
|                                         |                                |               |          |               |  |            |        |       |  |   |       |  




12.  CAPITAL AND OPERATING LEASES

MCN leases certain property (principally a warehouse, office
buildings and parking structure) under capital lease arrangements
 expiring at various dates to 2006, with renewal options
extending beyond that date. Portions of the office buildings and
parking structure are subleased to various tenants. Long-term
capital lease obligations are not significant.

84



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Minimum rental commitments related to non-cancelable operating
leases outstanding at December 31, 1999 are $5,980,000 in
2000, $5,625,000 in 2001, $4,804,000 in 2002, $3,228,000 in 2003,
 $3,049,000 in 2004 and $2,843,000 thereafter.

The minimum lease payments for operating leases have not been
reduced by future minimum sublease rentals totaling $1,778,000
under non-cancelable subleases.

Operating lease payments for the years ended December 31,
1999, 1998 and 1997 were $5,351,000, $6,774,000 and $5,007,000,
respectively.

13.  COMMITMENTS AND CONTINGENCIES

a.  Personal Property Taxes



Additionally, MichCon and other Michigan utilities have asserted
that Michigans valuation tables result in the substantial
overvaluation of utility personal property. Valuation tables are
used to estimate the reduction in value of personal property
based on the propertys age. In November 1999, the
Michigan State Tax Commission (STC) approved new valuation
tables that more accurately recognize the value of
utilities personal property. The new tables are effective
in 2000 and are expected to significantly reduce MichCons
property taxes. Based on past practice, MichCon expects to settle
 pending tax appeals with local governments by applying the new
tables retroactively, a solution supported in the past by the
STC.

Several local governments have taken legal action against the
State of Michigan to prevent the STC from implementing the new
valuation tables. MCNs future results of operations could
be significantly affected if the valuation tables are not upheld
in court or MichCon is unsuccessful in its appeals.

b.  Guaranties



MCN has a 47.5% interest in a partnership that owns and operates
a natural gas transmission and distribution system located in
southern Missouri. MCN has issued a guaranty for the full amount
of financing obtained by the partnership and one of the parties
to the partnership is obligated to reimburse MCN for 50% of any
payments made as a result of this guaranty. Borrowings
outstanding under the loan totaled $29,000,000 at
December 31, 1999.

85



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


A subsidiary of MichCon and an unaffiliated corporation have
formed a series of partnerships engaged in the construction and
development of a residential community on the Detroit riverfront
(Harbortown). One of the partnerships obtained $12,000,000 of
tax-exempt financing due June 2004 through the Michigan
State Housing Development Authority. Both partners and their
parent corporations have issued guaranties for the full amount of
 this financing, and each parent corporation has agreed to
reimburse the other for 50% of any payments made as a result of
these guaranties.

c.  Environmental Matters

Former manufactured gas plant sites 


During the mid-1980s, preliminary environmental investigations
were conducted at these former MGP sites, and some contamination
related to the by-products of gas manufacturing was discovered at
 each site. The existence of these sites and the results of the
environmental investigations have been reported to the Michigan
Department of Environmental Quality (MDEQ). None of these former
MGP sites is on the National Priorities List prepared by the U.S.
 Environmental Protection Agency (EPA).

MCN is involved in an administrative proceeding before the EPA
regarding one of the former MGP sites. MCN has executed an order
with the EPA, pursuant to which MCN is legally obligated to
investigate and remediate the MGP site. MCN is remediating five
of the former MGP sites and conducting more extensive
investigations at six other former MGP sites. In 1998, MCN
received state closure of one of the former MGP sites.
Additionally, the MDEQ has determined with respect to one other
former MGP site that MCN is not a responsible party for the
purpose of assessing remediation expenditures. MCN and the MDEQ
are in discussions on whether MCN is a responsible party for one
other former MGP site.

In 1984, MCN established an $11,700,000 reserve for environmental
 investigation and remediation. During 1993, MichCon received
MPSC approval of a cost deferral and rate recovery mechanism for
investigation and remediation costs incurred at former MGP sites
in excess of this reserve.

MCN employed outside consultants to evaluate remediation
alternatives for these sites, to assist in estimating its
potential liabilities and to review its archived insurance
policies. The findings of these investigations indicate that the
estimated total expenditures for investigation and remediation
activities for these sites could range from $30,000,000 to
$170,000,000 based on undiscounted 1995 costs. As a result of
these studies, MCN accrued an additional liability and a
corresponding regulatory asset of $35,000,000 during 1995.

MCN notified more than 50 current and former insurance carriers
of the environmental conditions at these former MGP sites. MCN
concluded settlement negotiations with certain carriers in 1996
and 1997 and has received payments from several carriers. In
October 1997, MCN filed suit against major non-settling
carriers seeking recovery of incurred costs and a declaratory
judgment of the carriers liability for future costs of
environmental investigation and remediation costs at former MGP
sites. A settlement was reached with a number of carriers with a
portion of the payment received in February 2000 and the
remaining portion expected by mid-2000. MCN is continuing
negotiations with the two remaining insurance carriers.

86



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


During 1999, 1998 and 1997, MCN spent $724,000, $1,649,000 and
$835,000, respectively, investigating and remediating these
former MGP sites. At December 31, 1999, the reserve balance
was $34,368,000 of which $6,300,000 was classified as current.
Any significant change in assumptions, such as remediation
techniques, nature and extent of contamination and regulatory
requirements, could impact the estimate of remedial action costs
for the sites and, therefore, have an effect on MCNs
financial position and cash flows. However, management believes
that insurance coverage and the cost deferral and rate recovery
mechanism approved by the MPSC will prevent environmental costs
from having a material adverse impact on MCNs results of
operations.

Formerly owned storage field In 1998, MichCon
received written notification from ANR Pipeline Company (ANR),
alleging that MichCon has responsibility for a portion of the
costs associated with responding to environmental conditions
present at a natural gas storage field in Michigan currently
owned and operated by an affiliate of ANR. At least some portion
of the natural gas storage field was formerly owned by MichCon.
MichCon is evaluating ANRs allegations to determine whether
 and to what extent, if any, that it may have legal
responsibility for these costs. Management does not believe this
matter will have a material adverse impact on MCNs
financial statements.

d.  Commitments



To ensure a reliable supply of natural gas at competitive prices,
 MCN has entered into long-term purchase and transportation
contracts with various suppliers and producers. In general,
purchases are under fixed price and volume contracts or formulas
based on market prices. MCN has firm purchase commitments through
 2009 for approximately 1,010 Bcf of gas, approximately 296 Bcf
of which are Gas Distribution purchase commitments. MCN expects
that sales, based on warmer-than-normal weather, will exceed its
minimum purchase commitments. MCN has long-term transportation
and storage contracts with various companies expiring on various
dates through the year 2016. MCN is also committed to pay demand
charges of approximately $99,600,000 during 2000 related to firm
purchase and transportation agreements. Of this total,
approximately $42,900,000 relates to Gas Distribution.

Capital investments for 2000 are expected to approximate
$325,000,000. Certain commitments have been made in connection
with such capital investments.

e.  Other



87



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


Management cannot predict the final disposition of such
proceedings, but believes that adequate provision has been made
for probable losses. It is managements belief, after
discussion with legal counsel, that the ultimate resolution of
those proceedings still pending will not have a material adverse
effect on MCNs financial statements.



|    |                                                                 
|--- | ----------------------------------------------------------------
|14. | RISK MANAGEMENT ACTIVITIES AND DERIVATIVE
	FINANCIAL INSTRUMENTS

MCN manages commodity price and interest rate risk through the
use of various derivative instruments and predominantly limits
the use of such instruments to hedging activities. If MCN did not
 use derivative instruments, its exposure to such risks would be
higher. Although this strategy reduces risk, it also limits
potential gains from favorable changes in commodity prices and
interest rates. Derivative instruments also give rise to credit
risks due to nonperformance by counterparties. MCNs control
 procedures are designed to minimize overall exposure to credit
risk. MCN closely monitors the financial condition and credit
ratings of counterparties, diversifies its risk by having a
significant number of counterparties, and limits its
counterparties to investment grade institutions. MCN generally
requires cash collateral when exposure to each counterparty
exceeds certain limits, and its agreements with each counterparty
 generally allow for the netting of positive and negative
positions.

Commodity price and interest rate risks are actively monitored by
 a risk control group to ensure compliance with MCNs risk
management policies at both the corporate and subsidiary levels.
These policies, including related risk limits, are regularly
assessed to ensure their appropriateness given MCNs
objectives, strategies and current market conditions. MCN closely
 monitors and manages its exposure to commodity price risk
through a variety of risk management techniques. MCNs
objective is to manage its exposure to commodity price risk to
increase the likelihood of achieving targeted rates of return.

Derivative instruments are reviewed periodically to ensure they
continue to effectively reduce exposure to commodity price and
interest rate risks, and therefore, high correlation is
maintained between changes in the fair value of derivative
instruments and the underlying items or transactions being
hedged. In the event that a derivative is no longer deemed
effective or does not qualify for hedge accounting, the
instruments are recorded as an asset or liability at fair value,
with changes in fair value recorded to income.

a.  Commodity Price Hedging Activities



88



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The following assets and liabilities related to the use of gas
and oil swap agreements are reflected in the Consolidated
Statement of Financial Position at December 31.



---

|                                     |                        |      |        |        |  |   |        |        | 
|------------------------------------ | ---------------------- | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                     |                        | 1999 |        | 1998  
|(in Thousands)                       |                        |      |        |       
|Deferred Swap Losses and Receivables |                        |      |        |        |  |   |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized losses      |      | $      | 13,884 |  |   | $      | 48,700 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Receivables            |      |        | 40,089 |  |   |        | 25,864 | 
|                                     |                        |      |        |        |  |   |        |       
|                                     |                        |      | 53,973 |        |  |   | 74,564 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Less  current portion |      |        | 10,066 |  |   |        | 11,417 | 
|                                     |                        |      |        |        |  |   |        |       
|                                     |                        | $    | 43,907 |        |  | $ | 63,147 |       
|                                     |                        |      |        |        |  |   |        |       
|Deferred Swap Gains and Payables     |                        |      |        |        |  |   |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized gains       |      | $      | 29,596 |  |   | $      | 24,126 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Payables               |      |        | 48,066 |  |   |        | 54,525 | 
|                                     |                        |      |        |        |  |   |        |       
|                                     |                        |      | 77,662 |        |  |   | 78,651 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Less  current portion |      |        | 12,700 |  |   |        | 15,695 | 
|                                     |                        |      |        |        |  |   |        |       
|                                     |                        | $    | 64,962 |        |  | $ | 62,956 |       
|                                     |                        |      |        |        |  |   |        |       




The following table of natural gas and oil swap agreements
outstanding at December 31 is summarized by fixed or
variable prices to be received. Notional amounts represent the
volume of transactions valued at the fixed or variable price that
 MCN has contracted to obtain. Notional amounts do not represent
the amounts exchanged by the parties to the swaps, and therefore
do not reflect MCNs exposure to commodity price or credit
risks.




|                                                  |                          |      |       |           |  |  |       |         | 
|------------------------------------------------- | ------------------------ | ---- | ----- | --------- |  |  | ----- | ------- | 
|                                                  |                          | 1999 |       | 1998     
|(in Thousands of Dollars)                         |                          |      |       |          
|Fixed Price Receiver                              |                          |      |       |           |  |  |       |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Volumes (Bcf equivalent) |      |       | 379.5     |  |  |       | 280.9   | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Notional value           |      | $     | 930,213   |  |  | $     | 675,671 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Latest maturity          |      |       | 2013      |  |  |       | 2013    | 
|                                                 
|                                                 
|                                                 
|                                                 
|Variable Price Receiver
	Volumes (Bcf equivalent) |                          |      | 512.9 |           |  |  | 364.0 |        
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Notional value           |      | $     | 1,331,560 |  |  | $     | 816,414 | 
|                                                 
|                                                 
|                                                 
|                                                 
|                                                  | Latest maturity          |      |       | 2013      |  |  |       | 2006    | 




At December 31, 1999, MCN had futures contracts that permit
settlement by delivery of the underlying commodity of 71.6 Bcf
with unrealized losses of $87,000. At December 31, 1998, MCN
 had futures contracts of 113.5 Bcf with unrealized gains of
$4,699,000.

Collateral in the form of cash totaling $6,600,000 was provided
under hedging contracts at December 31, 1999.

89



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


b.  Commodity Price Non-Hedging Activities



During 1999, MCN entered into certain gas purchase and sales
contracts that were deemed trading activities. These contracts
were also accounted for under the mark-to-market method, with
unrealized gains and losses recorded as adjustments to cost of
gas. The contracts did not significantly affect 1999 results and
were effectively closed out by June 1999.

c.  Interest Rate Hedging Activities



At December 31, 1999, MCN had interest rate swap agreements
with notional principal amounts totaling $184,333,000 (Note 9)
and a weighted average remaining life of 2.7 years. At
December 31, 1998, the notional principal amount of
outstanding interest rate swaps totaled $186,100,000. The
notional principal amounts are used solely to calculate amounts
to be paid or received under the interest rate swap agreements
and approximate the principal amount of the underlying debt being
 hedged.

15.  FAIR VALUE OF FINANCIAL AND OTHER
SIMILAR INSTRUMENTS

MCN has estimated the fair value of its financial instruments
using available market information and appropriate valuation
methodologies. Considerable judgment is required in developing
the estimates of the fair value of financial instruments and,
therefore, the values are not necessarily indicative of the
amounts that MCN could realize in a current market exchange. The
carrying amounts of certain financial instruments, such as notes
payable, customer deposits and notes receivable approximate fair
value.

90



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The carrying amount and fair value of other financial instruments
 consist of the following:




|                               |                                                     |                                                    |                        |           |   |          |   |           |        |         |   |           |       |         |   |           |       |         |  
|------------------------------ | --------------------------------------------------- | -------------------------------------------------- | ---------------------- | --------- | - | -------- | - | --------- | ------ | ------- | - | --------- | ----- | ------- | - | --------- | ----- | ------- | -
|                               |                                                     |                                                    |                        |          
|                               |                                                     | 1999                                               |                        | 1998     
|                               |                                                     |                                                    |                        |          
|                               |                                                     |                                                    |                        | Estimated |   |          |   | Estimated
|                               |                                                     | Carrying                                           |                        | Fair      |   | Carrying |   | Fair     
|                               |                                                     | Amount                                             |                        | Value     |   | Amount   |   | Value    
|(in Thousands)                 |                                                     |                                                    |                        |           |   |          |   |          
|                               |                                                     |                                                    |                        |           |   |          |   |          
|                              
|                              
|                              
|                              
|Assets                         |                                                     |                                                    |                        |           |   |          |   |           |        |         |   |           |       |         |   |          
|                              
|                              
|                              
|                              
|                               | Investment in debt and equity securities            |                                                    | $                      | 72,077    |   |          | $ | 72,077    |        |         | $ | 69,705    |       |         | $ | 69,705    |      
|                              
|                              
|                              
|                              
|Liabilities and Capitalization |                                                     |                                                    |                        |           |   |          |   |           |        |         |   |           |       |         |   |          
|                              
|                              
|                              
|                              
|                               | Long-term debt, excluding capital lease obligations |                                                    |                        | 1,454,135 |   |          |   | 1,406,957 |        |         |   | 1,301,823 |       |         |   | 1,358,371 |      
|                              
|                              
|                              
|                              
|                               | Redeemable preferred securities                     |                                                    |                        | 402,922   |   |          |   | 356,153   |        |         |   | 502,203   |       |         |   | 476,443   |      
|                              
|                              
|                              
|                              
|Derivative Financial and Other |                                                     |                                                    |                        |           |   |          |   |           |        |         |   |           |       |         |   |          
|                              
|                              
|                              
|                              
|                               | Similar Instruments(Note 14)                        |                                                    |                        |           |   |          |   |           |        |         |   |           |       |         |   |           |      
|                              
|                              
|                              
|                              
|                               |                                                     | Natural gas and oil swaps
	with realized gains*    |                        |           |  |          |   |           | 20,310 |         |   |           |      |         |   |           |      |        
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with realized losses*  |           |   |         |   |           |        | (40,423 | ) |           |       |        |   |           |       |        |  
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with unrealized gains  |           |   | 29,596   |   |           |        | 29,596  |   |           |       | 24,126  |   |           |       | 24,126  |  
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with unrealized losses |           |   | (13,884  | ) |           |        | (13,884 | ) |           |       | (48,700 | ) |           |       | (48,700 | )
|                              
|                              
|                              
|                              
|                               |                                                     | Natural gas and oil futures
	with unrealized gains |                        |           |  |          |   |           |       |         |   |           | 4,699 |         |   |           | 4,699 |        
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with unrealized losses |           |   | (87      | ) |           |        | (87     | ) |           |       |        |   |           |       |        |  
|                               |                                                     | Interest rate swaps                                |                        |           |   |          |   |           |        |         |   |           |       |         |   |           |       |        
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with unrealized gains  |           |   |         |   |           |        | 165     |   |           |       |        |   |           |       | 9,033   |  
|                              
|                              
|                              
|                              
|                               |                                                     |                                                    | with unrealized losses |           |   |         |   |           |        | (723    | ) |           |       |        |   |           |       | (696    | )




|  |                                                                                                                                               
|- | ----------------------------------------------------------------------------------------------------------------------------------------------
|* | Realized gains and losses have been recorded in earnings with the
	 corresponding amounts recorded as deferred swap receivables and
	payables.

The fair values are determined based on the following:



|  |                                                                                                                                                                                                                                                                                  
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Investment in debt and equity securities 
	carrying amount approximates fair value taking into consideration
	 interest rates available to MCN for investments with similar
	assumptions.                                                                                       
| 
| | Long-term debt  interest rates available to MCN
	 for issuance of debt with similar terms and remaining
	maturities.                                                                                                                                                            
| 
| | Redeemable cumulative preferred securities 
	quoted market prices on the New York Stock Exchange and interest
	rates available to MCN for issuance of preferred securities with
	similar terms.                                                                                 
| 
| | Natural gas and oil swaps and futures, and interest rate swaps  estimated amounts that MCN would receive or pay
	to terminate the swap agreements and futures, taking into account
	 current gas and oil prices, interest rates and the
	creditworthiness of the counterparties.
| 
| | Guaranties (Note 13b)  Management is
	unable to practicably estimate the fair value of the Southern
	Missouri, Genix and Harbortown guaranties due to the nature of
	the transactions.                                                                                          

The fair value estimates presented herein are based on
information available to management as of December 31, 1999
and 1998. Management is not aware of any subsequent factors that
would significantly affect the estimated fair value amounts.

91



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


16.  RETIREMENT BENEFITS AND TRUSTEED
ASSETS

a.  Pension Plan Benefits



Net pension credit for the years ended December 31 includes
the following components:




|                               |                      |      |         |        |   |      |         |        |   |   |         |        |  
|------------------------------ | -------------------- | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | -
|                               |                      | 1999 |         | 1998   |   | 1997
|(in Thousands)                 |                      |      |         |        |   |     
|                               |                      |      |         |        |   |     
|                              
|                              
|                              
|                              
|Service Cost                   |                      | $    | 13,413  |        |   | $    | 10,993  |        |   | $ | 10,380  |       
|                              
|                              
|                              
|                              
|Interest Cost                  |                      |      | 36,562  |        |   |      | 38,046  |        |   |   | 36,059  |       
|                              
|                              
|                              
|                              
|Expected Return on Plan Assets |                      |      | (81,455 | )      |   |      | (74,383 | )      |   |   | (63,879 | )     
|Amortization of                |                      |      |         |        |   |      |         |        |   |   |         |       
|                              
|                              
|                              
|                              
|                               | Net gain             |      |         | (5,477 | ) |      |         | (6,572 | ) |   |         | (5,410 | )
|                              
|                              
|                              
|                              
|                               | Prior service cost   |      |         | 1,724  |   |      |         | 1,044  |   |   |         | (149   | )
|                              
|                              
|                              
|                              
|                               | Net transition asset |      |         | (4,905 | ) |      |         | (5,023 | ) |   |         | (5,080 | )
|                              
|                              
|                              
|                              
|Special Termination Benefits   |                      |      |        |        |   |      | 5,054   |        |   |   |        |       
|                              
|                              
|                              
|                              
|Settlements                    |                      |      | (4,363  | )      |   |      | (7,300  | )      |   |   | (3,266  | )     
|                               |                      |      |         |        |   |      |         |        |   |   |         |       
|Net Pension Credit             |                      | $    | (44,501 | )      |   | $    | (38,141 | )      |   | $ | (31,345 | )     
|                               |                      |      |         |        |   |      |         |        |   |   |         |       




92



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The following table sets forth a reconciliation of the
obligations, assets and funded status of the plans as well as the
 amounts recognized as prepaid pension cost in the Consolidated
Statement of Financial Position:




|                                                            |                      |      |             |          |   |  |             |          |  
|----------------------------------------------------------- | -------------------- | ---- | ----------- | -------- | - |  | ----------- | -------- | -
|                                                            |                      | 1999 |             | 1998    
|(in Thousands)                                              |                      |      |             |         
|                                                            |                      |      |             |         
|                                                           
|                                                           
|                                                           
|                                                           
|Measurement Date                                            |                      |      | October  31 |          |   |  | October  31 |         
|                                                           
|                                                           
|                                                           
|                                                           
|Accumulated Benefit Obligation at the End of the Period     |                      |      | $ 436,041   |          |   |  | $ 462,347   |         
|                                                            |                      |      |             |          |   |  |             |         
|Projected Benefit Obligation at the Beginning of the Period |                      |      | $ 562,500   |          |   |  | $ 489,779   |         
|                                                           
|                                                           
|                                                           
|                                                           
|Service Cost                                                |                      |      | 13,413      |          |   |  | 10,993      |         
|                                                           
|                                                           
|                                                           
|                                                           
|Interest Cost                                               |                      |      | 36,562      |          |   |  | 38,046      |         
|                                                           
|                                                           
|                                                           
|                                                           
|Plan Amendments                                             |                      |      |            |          |   |  | 22,564      |         
|                                                           
|                                                           
|                                                           
|                                                           
|Actuarial (Gain) Loss                                       |                      |      | (68,247     | )        |   |  | 45,879      |         
|                                                           
|                                                           
|                                                           
|                                                           
|Special Termination Benefits                                |                      |      |            |          |   |  | 5,054       |         
|                                                           
|                                                           
|                                                           
|                                                           
|Settlements Due to Lump Sums                                |                      |      | (12,319     | )        |   |  | (21,033     | )       
|                                                           
|                                                           
|                                                           
|                                                           
|Regular Benefits                                            |                      |      | (30,900     | )        |   |  | (28,782     | )       
|                                                            |                      |      |             |          |   |  |             |         
|Projected Benefit Obligation at the End of the Period       |                      |      | $ 501,009   |          |   |  | $ 562,500   |         
|                                                            |                      |      |             |          |   |  |             |         
|Plan Assets at Fair Value at the Beginning of the Period    |                      |      | $ 905,292   |          |   |  | $ 844,107   |         
|                                                           
|                                                           
|                                                           
|                                                           
|Actual Return on Plan Assets                                |                      |      | 93,931      |          |   |  | 106,300     |         
|                                                           
|                                                           
|                                                           
|                                                           
|Settlements Due to Lump Sums                                |                      |      | (9,193      | )        |   |  | (16,333     | )       
|                                                           
|                                                           
|                                                           
|                                                           
|Regular Benefits                                            |                      |      | (30,900     | )        |   |  | (28,782     | )       
|                                                            |                      |      |             |          |   |  |             |         
|Plan Assets at Fair Value at the End of the Period          |                      |      | $ 959,130   |          |   |  | $ 905,292   |         
|                                                            |                      |      |             |          |   |  |             |         
|Funded Status of the Plans                                  |                      |      | $ 458,121   |          |   |  | $ 342,792   |         
|Unrecognized                                                |                      |      |             |          |   |  |             |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net gain             |      |             | (295,499 | ) |  |             | (221,245 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Prior service cost   |      |             | 17,724   |   |  |             | 19,448   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Net transition asset |      |             | (24,070  | ) |  |             | (29,220  | )
|                                                            |                      |      |             |          |   |  |             |         
|Prepaid Pension Cost                                        |                      |      | $ 156,276   |          |   |  | $ 111,775   |         
|                                                            |                      |      |             |          |   |  |             |         




In determining the actuarial present value of the projected
benefit obligation, the weighted average discount rate was 7.5%,
6.5% and 7.5% for 1999, 1998 and 1997, respectively. The rate of
increase in future compensation levels used was 5% for 1999, 1998
 and 1997. The expected long-term rate of return on plan assets,
which are invested primarily in equity and fixed income
securities, was 9.5% for both 1999 and 1998 and 9.25% for 1997.

In 1998, MichCon implemented an early retirement program under
which approximately 6% of its workforce retired in 1998 with
incentives. The program increased the projected benefit
obligation and 1998 pension costs by $5,054,000.

MCN also sponsors defined contribution retirement savings plans.
Participation in one of these plans is available to substantially
 all union and nonunion employees. MCN matches employee
contributions up to certain predefined limits based upon salary
and years of credited service. The cost of these plans was
$5,800,000 in 1999, $5,600,000 in 1998 and $6,200,000 in 1997.

93



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


b.  Other Postretirement Benefits

Employers Accounting for Postretirement Benefits Other Than
 Pensions,


MCNs policy is to fund certain trusts to meet its
postretirement benefit obligations related to Gas Distribution.
Separate qualified Voluntary Employees Beneficiary
Association (VEBA) trusts exist for union and nonunion
employees. There were no contributions made to the VEBA trusts in
 1999. Funding to the VEBA trusts totaled $2,200,000 and
$6,700,000 in 1998 and 1997, respectively. The expected long-term
 rate of return on plan assets that are invested in life
insurance policies, equity securities and fixed income
securities, was 9.8% for both 1999 and 1998 and 9.1% for 1997.

Net postretirement cost for the years ended December 31
includes the following components:




|                               |                           |      |         |        |   |      |         |        |   |   |         |        |  
|------------------------------ | ------------------------- | ---- | ------- | ------ | - | ---- | ------- | ------ | - | - | ------- | ------ | -
|                               |                           | 1999 |         | 1998   |   | 1997
|(in Thousands)                 |                           |      |         |        |   |     
|                               |                           |      |         |        |   |     
|                              
|                              
|                              
|                              
|Service Cost                   |                           | $    | 4,721   |        |   | $    | 4,044   |        |   | $ | 4,354   |       
|                              
|                              
|                              
|                              
|Interest Cost                  |                           |      | 16,648  |        |   |      | 16,891  |        |   |   | 17,857  |       
|                              
|                              
|                              
|                              
|Expected Return on Plan Assets |                           |      | (14,914 | )      |   |      | (13,570 | )      |   |   | (11,082 | )     
|Amortization of                |                           |      |         |        |   |      |         |        |   |   |         |       
|                              
|                              
|                              
|                              
|                               | Net gain                  |      |         | (4,511 | ) |      |         | (5,723 | ) |   |         | (4,933 | )
|                              
|                              
|                              
|                              
|                               | Net transition obligation |      |         | 12,898 |   |      |         | 12,898 |   |   |         | 13,587 |  
|                              
|                              
|                              
|                              
|Special Termination Benefits   |                           |      |        |        |   |      | 1,186   |        |   |   |        |       
|                               |                           |      |         |        |   |      |         |        |   |   |         |       
|Total Postretirement Cost      |                           |      | 14,842  |        |   |      | 15,726  |        |   |   | 19,783  |       
|                              
|                              
|                              
|                              
|Regulatory Adjustment          |                           |      | 44      |        |   |      | 43      |        |   |   | 4,907   |       
|                               |                           |      |         |        |   |      |         |        |   |   |         |       
|Net Postretirement Cost        |                           | $    | 14,886  |        |   | $    | 15,769  |        |   | $ | 24,690  |       
|                               |                           |      |         |        |   |      |         |        |   |   |         |       




94



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The following table sets forth a reconciliation of the
obligations, assets and funded status of the plans as well as the
 amounts recorded as accrued postretirement cost in the
Consolidated Statement of Financial Position:




|                                                                               |                           |      |             |          |   |   |             |          |  
|------------------------------------------------------------------------------ | ------------------------- | ---- | ----------- | -------- | - | - | ----------- | -------- | -
|                                                                               |                           | 1999 |             | 1998    
|(in Thousands)                                                                 |                           |      |             |         
|Measurement Date                                                               |                           |      | October  31 |          |   |   | October  31 |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Accumulated Postretirement Benefit Obligation at the Beginning of
	 the Period |                           | $    | 256,147     |          |   | $ | 229,337     |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Service Cost                                                                   |                           |      | 4,721       |          |   |   | 4,044       |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Interest Cost                                                                  |                           |      | 16,648      |          |   |   | 16,891      |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Plan Amendments                                                                |                           |      |            |          |   |   | (8,269      | )       
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Actuarial (Gain) Loss                                                          |                           |      | (6,514      | )        |   |   | 24,660      |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Special Termination Benefits                                                   |                           |      |            |          |   |   | 1,186       |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Benefits Paid                                                                  |                           |      | (12,480     | )        |   |   | (11,702     | )       
|                                                                               |                           |      |             |          |   |   |             |         
|Accumulated Postretirement Benefit Obligation at the End of the
	Period        |                           | $    | 258,522     |          |   | $ | 256,147     |         
|                                                                               |                           |      |             |          |   |   |             |         
|Plan Assets at Fair Value at the Beginning of the Period                       |                           | $    | 174,279     |          |   | $ | 152,405     |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Actual Return on Plan Assets                                                   |                           |      | 26,349      |          |   |   | 25,848      |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Company Contributions                                                          |                           |      | 2,200       |          |   |   | 6,700       |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Regular Benefits                                                               |                           |      | (11,720     | )        |   |   | (10,674     | )       
|                                                                               |                           |      |             |          |   |   |             |         
|Plan Assets at Fair Value at the End of the Period                             |                           | $    | 191,108     |          |   | $ | 174,279     |         
|                                                                               |                           |      |             |          |   |   |             |         
|Funded Status of the Plans                                                     |                           | $    | (67,414     | )        |   | $ | (81,868     | )       
|Unrecognized                                                                   |                           |      |             |          |   |   |             |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Net gain                  |      |             | (129,429 | ) |   |             | (116,959 | )
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|                                                                               | Net transition obligation |      |             | 177,843  |   |   |             | 190,776  |  
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Contributions Made After Measurement Date                                      |                           |      |            |          |   |   | 2,200       |         
|                                                                              
|                                                                              
|                                                                              
|                                                                              
|Regular Benefits Made After Measurement Date                                   |                           |      |            |          |   |   | (11,720     | )       
|                                                                               |                           |      |             |          |   |   |             |         
|Accrued Postretirement Liability                                               |                           | $    | (19,000     | )        |   | $ | (17,571     | )       
|                                                                               |                           |      |             |          |   |   |             |         




The rate at which healthcare costs are assumed to increase is the
 most significant factor in estimating MCNs postretirement
benefit obligation. MCN used a rate of 8% for 2000, and a rate
that gradually declines each year until it stabilizes at 5% in
2005. A one percentage point increase in the assumed rates would
increase the accumulated postretirement benefit obligation at
December 31, 1999 by $34,907,000 (14%) and increase the sum
of the service and interest rate cost by $3,532,000 (17%) for the
 year then ended. A one percentage point decrease in the assumed
rates would decrease the accumulated postretirement benefit
obligation at December 31, 1999 by $30,422,000 (12%) and
decrease the sum of the service and interest rate cost by
$3,027,000 (14%) for the year then ended.

The discount rate used in determining the accumulated
postretirement benefit obligation was 7.5%, 6.5% and 7.5% for
1999, 1998 and 1997, respectively.

In 1998, MichCon implemented an early retirement program under
which approximately 6% of its workforce retired in 1998 with
incentives. The program increased the postretirement benefit
obligation and 1998 postretirement costs by $1,186,000.

95



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


c.  Grantor Trust



17.  SUMMARY OF INCOME TAXES

MCN files a consolidated federal income tax return. The income
tax provisions or benefits of MCNs subsidiaries are
determined on an individual company basis. The subsidiaries
record income tax payable to or receivable from MCN resulting
from the inclusion of its taxable income or loss in MCNs
consolidated tax return.




|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |         |  
|-------------------------------------------------------- | ---------------------------------------------- | ---- | ------- | ------ | - | ---- | -------- | -------- | - | - | ------ | ------- | -
|                                                         |                                                | 1999 |         | 1998   |   | 1997
|(in Thousands)                                           |                                                |      |         |        |   |     
|Effective Federal Income Tax Rate                        |                                                |      | 28.1    | %      |   |      | 38.8     | %        |   |   | 25.1   | %      
|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |        
|Income Taxes Consist of:                                 |                                                |      |         |        |   |      |          |          |   |   |        |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Current                                        |      | $       | (5,289 | ) |      | $        | 7,002    |   |   | $      | 18,280  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Deferred, net                                  |      |         | (2,380 | ) |      |          | (176,995 | ) |   |        | 48,728  |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Gas production tax credits                     |      |         |       |   |      |          | (10,485  | ) |   |        | (17,797 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Tax credits, net                               |      |         | (2,034 | ) |      |          | (2,990   | ) |   |        | (1,973  | )
|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |        
|                                                         |                                                | $    | (9,703  | )      |   | $    | (183,468 | )        |   | $ | 47,238 |        
|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |        
|Reconciliation Between Statutory and Actual Income Taxes |                                                |      |         |        |   |      |          |          |   |   |        |        
|                                                        
|                                                        
|                                                        
|                                                        
|Statutory Federal Income Taxes at a Rate of 35%          |                                                | $    | (13,188 | )      |   | $    | (164,477 | )        |   | $ | 63,165 |        
|Adjustments to Federal Taxes                             |                                                |      |         |        |   |      |          |          |   |   |        |        
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Book over tax depreciation                     |      |         | 2,018  |   |      |          | 1,071    |   |   |        | 5,301   |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Adjustments to taxes provided in prior periods |      |         | 1,486  |   |      |          | (412     | ) |   |        | (162    | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Merger expenses                                |      |         | 2,192  |   |      |          |         |   |   |        |        |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Stock-related benefits                         |      |         | (832   | ) |      |          | (1,095   | ) |   |        |        |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Gas production tax credits                     |      |         |       |   |      |          | (10,485  | ) |   |        | (17,797 | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Tax credits                                    |      |         | (2,034 | ) |      |          | (2,990   | ) |   |        | (1,973  | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Allowance for funds used during construction   |      |         | (1,444 | ) |      |          | (1,900   | ) |   |        | (1,105  | )
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Foreign earnings, distributed (undistributed)  |      |         | 1,244  |   |      |          | (1,244   | ) |   |        |        |  
|                                                        
|                                                        
|                                                        
|                                                        
|                                                         | Other, net                                     |      |         | 855    |   |      |          | (1,936   | ) |   |        | (191    | )
|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |        
|                                                         |                                                | $    | (9,703  | )      |   | $    | (183,468 | )        |   | $ | 47,238 |        
|                                                         |                                                |      |         |        |   |      |          |          |   |   |        |        




Deferred tax assets and liabilities are recognized for the
estimated future tax effect of temporary differences between the
tax basis of assets or liabilities and the reported amounts in
the financial statements. Deferred tax assets and liabilities are
 classified as current or noncurrent according to the
classification of the related assets or liabilities. Deferred tax
 assets and liabilities not related to assets or liabilities are
classified according to the expected reversal date of the
temporary differences. The alternative minimum tax credits may be
 carried forward indefinitely, and the net operating loss may be
carried forward until 2019.

96



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


The tax effect of temporary differences that gave rise to
MCNs deferred tax assets and liabilities consisted of the
following:



|                                                   |                                                                |      |         |        |  |   |         |        | 
|-------------------------------------------------- | -------------------------------------------------------------- | ---- | ------- | ------ |  | - | ------- | ------ | 
|                                                   |                                                                | 1999 |         | 1998  
|(in Thousands)                                     |                                                                |      |         |       
|Deferred Tax Assets                                |                                                                |      |         |        |  |   |         |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Alternative minimum tax credit carry-forward                   |      | $       | 68,337 |  |   | $       | 71,519 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Vacation and other benefits                                    |      |         | 17,265 |  |   |         | 17,745 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Postretirement benefits                                        |      |         | 6,478  |  |   |         | 6,287  | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Uncollectibles                                                 |      |         | 6,331  |  |   |         | 3,234  | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Unusual charges                                                |      |         | 4,139  |  |   |         | 5,915  | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Net operating loss                                             |      |         | 84,151 |  |   |         |       | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                                                          |      |         | 15,592 |  |   |         | 20,257 | 
|                                                   |                                                                |      |         |        |  |   |         |       
|                                                   |                                                                |      | 202,293 |        |  |   | 124,957 |       
|                                                   |                                                                |      |         |        |  |   |         |       
|Deferred Tax Liabilities                           |                                                                |      |         |        |  |   |         |       
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Depreciation and other property-related basis differences, net |      |         | 64,331 |  |   |         | 12,978 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Pensions                                                       |      |         | 51,004 |  |   |         | 36,751 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Property taxes                                                 |      |         | 17,819 |  |   |         | 13,072 | 
|                                                  
|                                                  
|                                                  
|                                                  
|                                                   | Other                                                          |      |         | 21,866 |  |   |         | 21,016 | 
|                                                   |                                                                |      |         |        |  |   |         |       
|                                                   |                                                                |      | 155,020 |        |  |   | 83,817  |       
|                                                   |                                                                |      |         |        |  |   |         |       
|Net Deferred Tax Asset                             |                                                                |      | 47,273  |        |  |   | 41,140  |       
|                                                  
|                                                  
|                                                  
|                                                  
|Less: Net Deferred Tax Asset (Liability)  Current |                                                                |      | 32,508  |        |  |   | (9,407  | )     
|                                                   |                                                                |      |         |        |  |   |         |       
|Net Deferred Tax Asset  Noncurrent                |                                                                | $    | 14,765  |        |  | $ | 50,547  |       
|                                                   |                                                                |      |         |        |  |   |         |       




18.  SEGMENT INFORMATION

MCN is a diversified energy holding company with natural gas
markets and investments primarily in North America. In 1999, MCN
announced a significantly revised strategic direction. As a part
of its revised strategic direction, MCN is reorganizing into the
following business segments: Gas Distribution; Midstream &
Supply; Energy Marketing; Power; and Energy Holdings. MCN expects
 to begin reporting its operating results based on the new
segments in 2000. During 1999, MCN continued reporting through
two major business groups: Diversified Energy and Gas
Distribution. These groups operate five major business segments
as described in the Summary of Significant Accounting
Policies  Company Description (Note 1).

Information as to MCNs segments is set forth in the
following tables. The segments were determined based on the
nature of their products and services and how management reviews
operating results. MCN evaluates segment performance based on
several factors, of which the primary measure is income or loss
before accounting changes. Inter-segment sales are based on
long-term fixed-price or index-price contracts.

97



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)




---

|                                                      |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |           | 
|----------------------------------------------------- | ----------------------------------------- | ------------------ | ------- | -------- |  | --------- | ------- | ------------- |  | ---------- | --------- | ------------ | - | - | ------- | ------- | - | - | ------- | ------ | - | - | --------- | --------- | 
|                                                      |                                           |                    |         |         
|                                                      |                                           | Diversified Energy |         |         
|                                                      |                                           |                    |         |         
|                                                      |                                           | Pipelines &        |         | Electric |  | Energy    |         | Exploration & |  | Corporate  |           | Gas         
|                                                      |                                           | Processing         |         | Power    |  | Marketing |         | Production    |  | & Other(a) |           | Distribution
|(in Thousands)                                        |                                           |                    |         |          |  |           |         |               |  |            |           |             
|1999                                                  |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues From Unaffiliated Customers                  |                                           | $                  | 24,792  |          |  | $         | 52,207  |               |  | $          | 1,198,709 |              |   | $ | 43,370  |         |   | $ |        |        |   | $ | 1,161,990 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues From Affiliated Customers                    |                                           |                    | 2,249   |          |  |           |        |               |  |            | 68,793    |              |   |   | 109,719 |         |   |   |        |        |   |   | 8,610     |          
|                                                      |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|                                                      | Total operating revenues                  |                    |         | 27,041   |  |           |         | 52,207        |  |            |           | 1,267,502    |   |   |         | 153,089 |   |   |         |       |   |   |           | 1,170,600 | 
|                                                      |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|Depreciation, Depletion and Amortization              |                                           |                    | 3,037   |          |  |           | 185     |               |  |            | 2,016     |              |   |   | 57,277  |         |   |   | 2,009   |        |   |   | 100,114   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Operating Income (Loss)                               |                                           |                    | (5,527  | )        |  |           | (8,717  | )             |  |            | (10,767   | )            |   |   | (39,681 | )       |   |   | (9,543  | )      |   |   | 213,063   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in Earnings of Joint Ventures                  |                                           |                    | 24,711  |          |  |           | 26,651  |               |  |            | (677      | )            |   |   |        |         |   |   | (257    | )      |   |   | 1,958     |          
|                                                      |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|                                                      | Operating and joint venture income (loss) |                    |         | 19,184   |  |           |         | 17,934        |  |            |           | (11,444      | ) |   |         | (39,681 | ) |   |         | (9,800 | ) |   |           | 215,021   | 
|                                                      |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|Interest Income                                       |                                           |                    | 1,069   |          |  |           | 1,304   |               |  |            | 1,103     |              |   |   | 352     |         |   |   | 50,264  |        |   |   | 2,310     |          
|                                                     
|                                                     
|                                                     
|                                                     
|Interest Expense(b)                                   |                                           |                    | (20,258 | )        |  |           | (1,042  | )             |  |            | (9,230    | )            |   |   | (15,169 | )       |   |   | (67,492 | )      |   |   | (56,409   | )        
|                                                     
|                                                     
|                                                     
|                                                     
|Income Taxes                                          |                                           |                    | 925     |          |  |           | 8,553   |               |  |            | (7,784    | )            |   |   | (45,066 | )       |   |   | (21,407 | )      |   |   | 55,076    |          
|                                                     
|                                                     
|                                                     
|                                                     
|Income (Loss) Before Accounting Change                |                                           |                    | 4,523   |          |  |           | 11,458  |               |  |            | (14,631   | )            |   |   | (87,163 | )       |   |   | (45,618 | )      |   |   | 103,455   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Total Assets                                          |                                           |                    | 688,792 |          |  |           | 237,502 |               |  |            | 424,316   |              |   |   | 636,053 |         |   |   | 86,176  |        |   |   | 2,196,367 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Investments in and Advances to Joint Ventures         |                                           |                    | 575,684 |          |  |           | 145,684 |               |  |            | 21,512    |              |   |   |        |         |   |   | 18,194  |        |   |   | 2,898     |          
|                                                     
|                                                     
|                                                     
|                                                     
|Capital Expenditures                                  |                                           |                    | 3,615   |          |  |           | 52,364  |               |  |            | 905       |              |   |   | 99,962  |         |   |   | 500     |        |   |   | 136,912   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Capital Investments                                   |                                           |                    | 120,419 |          |  |           | 130,432 |               |  |            | 8,074     |              |   |   | 99,962  |         |   |   | 580     |        |   |   | 136,912   |          
|Significant Non-cash Items (Pre-tax): (Notes 3 and 5) |                                           |                    |         |          |  |           |         |               |  |            |           |              |   |   |         |         |   |   |         |        |   |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Property write-downs                      |                    |         |         |  |           |         | 4,995         |  |            |           |             |   |   |         | 54,340  |   |   |         |       |   |   |           |          | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Loss on sale of E&P properties            |                    |         |         |  |           |         |              |  |            |           |             |   |   |         | 81,989  |   |   |         |       |   |   |           |          | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Investment and contract losses            |                    |         |         |  |           |         |              |  |            |           | 2,447        |   |   |         | 7,456   |   |   |         |       |   |   |           |          | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounting change                         |                    |         | 866      |  |           |         | 3,505         |  |            |           | 47           |   |   |         |        |   |   |         |       |   |   |           |          | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                                      |                                           |              |          |              |   |   |           |           | 
|----------------------------------------------------- | ----------------------------------------- | ------------ | -------- | ------------ | - | - | --------- | --------- | 
|                                                      |                                           | Eliminations |          | Consolidated
|                                                      |                                           | & Other      |          | Total       
|(in Thousands)                                        |                                           |              |          |             
|1999                                                  |                                           |              |          |              |   |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues From Unaffiliated Customers                  |                                           | $            |         |              |   | $ | 2,481,068 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Revenues From Affiliated Customers                    |                                           |              | (189,371 | )            |   |   |          |          
|                                                      |                                           |              |          |              |   |   |           |          
|                                                      | Total operating revenues                  |              |          | (189,371     | ) |   |           | 2,481,068 | 
|                                                      |                                           |              |          |              |   |   |           |          
|Depreciation, Depletion and Amortization              |                                           |              |         |              |   |   | 164,638   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Operating Income (Loss)                               |                                           |              |         |              |   |   | 138,828   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Equity in Earnings of Joint Ventures                  |                                           |              |         |              |   |   | 52,386    |          
|                                                      |                                           |              |          |              |   |   |           |          
|                                                      | Operating and joint venture income (loss) |              |          |             |   |   |           | 191,214   | 
|                                                      |                                           |              |          |              |   |   |           |          
|Interest Income                                       |                                           |              | (49,827  | )            |   |   | 6,575     |          
|                                                     
|                                                     
|                                                     
|                                                     
|Interest Expense(b)                                   |                                           |              | 49,827   |              |   |   | (119,773  | )        
|                                                     
|                                                     
|                                                     
|                                                     
|Income Taxes                                          |                                           |              |         |              |   |   | (9,703    | )        
|                                                     
|                                                     
|                                                     
|                                                     
|Income (Loss) Before Accounting Change                |                                           |              |         |              |   |   | (27,976   | )        
|                                                     
|                                                     
|                                                     
|                                                     
|Total Assets                                          |                                           |              | (30,152  | )            |   |   | 4,239,054 |          
|                                                     
|                                                     
|                                                     
|                                                     
|Investments in and Advances to Joint Ventures         |                                           |              |         |              |   |   | 763,972   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Capital Expenditures                                  |                                           |              |         |              |   |   | 294,258   |          
|                                                     
|                                                     
|                                                     
|                                                     
|Capital Investments                                   |                                           |              |         |              |   |   | 496,379   |          
|Significant Non-cash Items (Pre-tax): (Notes 3 and 5) |                                           |              |          |              |   |   |           |          
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Property write-downs                      |              |          |             |   |   |           | 59,335    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Loss on sale of E&P properties            |              |          |             |   |   |           | 81,989    | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Investment and contract losses            |              |          |             |   |   |           | 9,903     | 
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      | Accounting change                         |              |          |             |   |   |           | 4,418     | 




|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Corporate & Other includes administrative and
	financing expenses associated with corporate activities as well
	as development and management activities of real estate
	partnerships.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Interest expense is allocated from Corporate &
	 Other to each Diversified Energy segment based on an imputed
	debt structure reflective of the segments related industry.

98



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)




---

|                                               |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |           |  
|---------------------------------------------- | ---------------------------------------------- | ------------------ | -------- | -------- | - | --------- | ------- | ------------- | - | ---------- | ------- | ------------ | - | - | -------- | -------- | - | - | ------- | ------- | - | - | --------- | --------- | -
|                                               |                                                |                    |          |         
|                                               |                                                | Diversified Energy |          |         
|                                               |                                                |                    |          |         
|                                               |                                                | Pipelines &        |          | Electric |   | Energy    |         | Exploration & |   | Corporate  |         | Gas         
|                                               |                                                | Processing         |          | Power    |   | Marketing |         | Production    |   | & Other(a) |         | Distribution
|(in Thousands)                                 |                                                |                    |          |          |   |           |         |               |   |            |         |             
|1998                                           |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|                                              
|                                              
|                                              
|                                              
|Revenues From Unaffiliated Customers           |                                                | $                  | 20,856   |          |   | $         | 47,131  |               |   | $          | 767,068 |              |   | $ | 150,504  |          |   | $ |        |         |   | $ | 1,045,139 |          
|                                              
|                                              
|                                              
|                                              
|Revenues From Affiliated Customers             |                                                |                    | 345      |          |   |           |        |               |   |            | 105,543 |              |   |   | 56,598   |          |   |   |        |         |   |   | 6,635     |          
|                                               |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|                                               | Total operating revenues                       |                    |          | 21,201   |   |           |         | 47,131        |   |            |         | 872,611      |   |   |          | 207,102  |   |   |         |        |   |   |           | 1,051,774 |  
|                                               |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|Depreciation, Depletion and Amortization       |                                                |                    | 1,705    |          |   |           | 208     |               |   |            | 1,229   |              |   |   | 80,576   |          |   |   | 1,998   |         |   |   | 93,774    |          
|                                              
|                                              
|                                              
|                                              
|Operating Income (Loss)                        |                                                |                    | (146,264 | )        |   |           | (5,021  | )             |   |            | (5,987  | )            |   |   | (387,955 | )        |   |   | (19,162 | )       |   |   | 158,537   |          
|                                              
|                                              
|                                              
|                                              
|Equity in Earnings of Joint Ventures           |                                                |                    | 29,987   |          |   |           | 28,546  |               |   |            | 2,401   |              |   |   |         |          |   |   | 308     |         |   |   | 983       |          
|                                               |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|                                               | Operating and joint venture income (loss)      |                    |          | (116,277 | ) |           |         | 23,525        |   |            |         | (3,586       | ) |   |          | (387,955 | ) |   |         | (18,854 | ) |   |           | 159,520   |  
|                                               |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|Interest Income                                |                                                |                    | 1,001    |          |   |           | 944     |               |   |            | 1,676   |              |   |   | 426      |          |   |   | 53,100  |         |   |   | 5,716     |          
|                                              
|                                              
|                                              
|                                              
|Interest Expense(b)                            |                                                |                    | (14,382  | )        |   |           | (2,021  | )             |   |            | (5,726  | )            |   |   | (21,154  | )        |   |   | (62,960 | )       |   |   | (57,477   | )        
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                   |                                                |                    | (46,893  | )        |   |           | 8,212   |               |   |            | (510    | )            |   |   | (160,900 | )        |   |   | (16,377 | )       |   |   | 33,000    |          
|                                              
|                                              
|                                              
|                                              
|Net Income (Loss)                              |                                                |                    | (82,240  | )        |   |           | 19,271  |               |   |            | (1,037  | )            |   |   | (253,353 | )        |   |   | (40,843 | )       |   |   | 71,734    |          
|                                              
|                                              
|                                              
|                                              
|Total Assets                                   |                                                |                    | 575,969  |          |   |           | 300,529 |               |   |            | 386,917 |              |   |   | 988,201  |          |   |   | 72,388  |         |   |   | 2,116,173 |          
|                                              
|                                              
|                                              
|                                              
|Investments in and Advances to Joint Ventures  |                                                |                    | 521,711  |          |   |           | 231,668 |               |   |            | 29,435  |              |   |   |         |          |   |   | 18,939  |         |   |   | 1,478     |          
|                                              
|                                              
|                                              
|                                              
|Capital Expenditures                           |                                                |                    | 113,229  |          |   |           | 3,616   |               |   |            | 582     |              |   |   | 200,430  |          |   |   | 6,966   |         |   |   | 157,952   |          
|                                              
|                                              
|                                              
|                                              
|Capital Investments                            |                                                |                    | 333,128  |          |   |           | 90,223  |               |   |            | 1,341   |              |   |   | 200,430  |          |   |   | 7,092   |         |   |   | 158,716   |          
|Significant Non-cash Items (Pre-tax): (Note 3) |                                                |                    |          |          |   |           |         |               |   |            |         |              |   |   |          |          |   |   |         |         |   |   |           |          
|                                              
|                                              
|                                              
|                                              
|                                               | Property write-downs and restructuring charges |                    |          | (137,681 | ) |           |         | (2,470        | ) |            |         |             |   |   |          | (416,977 | ) |   |         | (10,390 | ) |   |           | (24,800   | )
|                                              
|                                              
|                                              
|                                              
|                                               | Investment losses                              |                    |          |         |   |           |         |              |   |            |         |             |   |   |          | (6,135   | ) |   |         |        |   |   |           | (8,500    | )

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                               |                                                |              |          |              |   |   |           |           |  
|---------------------------------------------- | ---------------------------------------------- | ------------ | -------- | ------------ | - | - | --------- | --------- | -
|                                               |                                                | Eliminations |          | Consolidated
|                                               |                                                | & Other      |          | Total       
|(in Thousands)                                 |                                                |              |          |             
|1998                                           |                                                |              |          |              |   |   |           |          
|                                              
|                                              
|                                              
|                                              
|Revenues From Unaffiliated Customers           |                                                | $            |         |              |   | $ | 2,030,698 |          
|                                              
|                                              
|                                              
|                                              
|Revenues From Affiliated Customers             |                                                |              | (169,121 | )            |   |   |          |          
|                                               |                                                |              |          |              |   |   |           |          
|                                               | Total operating revenues                       |              |          | (169,121     | ) |   |           | 2,030,698 |  
|                                               |                                                |              |          |              |   |   |           |          
|Depreciation, Depletion and Amortization       |                                                |              |         |              |   |   | 179,490   |          
|                                              
|                                              
|                                              
|                                              
|Operating Income (Loss)                        |                                                |              |         |              |   |   | (405,852  | )        
|                                              
|                                              
|                                              
|                                              
|Equity in Earnings of Joint Ventures           |                                                |              |         |              |   |   | 62,225    |          
|                                               |                                                |              |          |              |   |   |           |          
|                                               | Operating and joint venture income (loss)      |              |          |             |   |   |           | (343,627  | )
|                                               |                                                |              |          |              |   |   |           |          
|Interest Income                                |                                                |              | (51,970  | )            |   |   | 10,893    |          
|                                              
|                                              
|                                              
|                                              
|Interest Expense(b)                            |                                                |              | 51,970   |              |   |   | (111,750  | )        
|                                              
|                                              
|                                              
|                                              
|Income Taxes                                   |                                                |              |         |              |   |   | (183,468  | )        
|                                              
|                                              
|                                              
|                                              
|Net Income (Loss)                              |                                                |              |         |              |   |   | (286,468  | )        
|                                              
|                                              
|                                              
|                                              
|Total Assets                                   |                                                |              | (47,279  | )            |   |   | 4,392,898 |          
|                                              
|                                              
|                                              
|                                              
|Investments in and Advances to Joint Ventures  |                                                |              |         |              |   |   | 803,231   |          
|                                              
|                                              
|                                              
|                                              
|Capital Expenditures                           |                                                |              |         |              |   |   | 482,775   |          
|                                              
|                                              
|                                              
|                                              
|Capital Investments                            |                                                |              |         |              |   |   | 790,930   |          
|Significant Non-cash Items (Pre-tax): (Note 3) |                                                |              |          |              |   |   |           |          
|                                              
|                                              
|                                              
|                                              
|                                               | Property write-downs and restructuring charges |              |          |             |   |   |           | (592,318  | )
|                                              
|                                              
|                                              
|                                              
|                                               | Investment losses                              |              |          |             |   |   |           | (14,635   | )




|                                              |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |           | 
|--------------------------------------------- | ----------------------------------------- | ------------------ | ------- | -------- |  | --------- | ------- | ------------- |  | ---------- | ------- | ------------ | - | - | --------- | ------- |  | - | ------- | ------ | - | - | --------- | --------- | 
|                                              |                                           |                    |         |         
|                                              |                                           | Diversified Energy |         |         
|                                              |                                           |                    |         |         
|                                              |                                           | Pipelines &        |         | Electric |  | Energy    |         | Exploration & |  | Corporate  |         | Gas         
|                                              |                                           | Processing         |         | Power    |  | Marketing |         | Production    |  | & Other(a) |         | Distribution
|(in Thousands)                                |                                           |                    |         |          |  |           |         |               |  |            |         |             
|1997                                          |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |          
|                                             
|                                             
|                                             
|                                             
|Revenues From Unaffiliated Customers          |                                           | $                  | 6,971   |          |  | $         | 51,804  |               |  | $          | 743,793 |              |   | $ | 144,033   |         |  | $ |        |        |   | $ | 1,261,266 |          
|                                             
|                                             
|                                             
|                                             
|Revenues From Affiliated Customers            |                                           |                    | 397     |          |  |           |        |               |  |            | 92,921  |              |   |   | 71,795    |         |  |   |        |        |   |   | 10,020    |          
|                                              |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |          
|                                              | Total operating revenues                  |                    |         | 7,368    |  |           |         | 51,804        |  |            |         | 836,714      |   |   |           | 215,828 |  |   |         |       |   |   |           | 1,271,286 | 
|                                              |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |          
|Depreciation, Depletion and Amortization      |                                           |                    | 1,153   |          |  |           | (22     | )             |  |            | 915     |              |   |   | 73,909    |         |  |   | 1,220   |        |   |   | 104,437   |          
|                                             
|                                             
|                                             
|                                             
|Operating Income (Loss)                       |                                           |                    | 585     |          |  |           | 5,377   |               |  |            | (7,414  | )            |   |   | 51,455    |         |  |   | (4,433  | )      |   |   | 176,820   |          
|                                             
|                                             
|                                             
|                                             
|Equity in Earnings of Joint Ventures          |                                           |                    | 28,551  |          |  |           | 12,653  |               |  |            | 5,182   |              |   |   | 6,600     |         |  |   | 139     |        |   |   | 2,534     |          
|                                              |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |          
|                                              | Operating and joint venture income (loss) |                    |         | 29,136   |  |           |         | 18,030        |  |            |         | (2,232       | ) |   |           | 58,055  |  |   |         | (4,294 | ) |   |           | 179,354   | 
|                                              |                                           |                    |         |          |  |           |         |               |  |            |         |              |   |   |           |         |  |   |         |        |   |   |           |          
|Interest Income                               |                                           |                    | 109     |          |  |           | 278     |               |  |            | 2,332   |              |   |   | 160       |         |  |   | 37,202  |        |   |   | 4,735     |          
|                                             
|                                             
|                                             
|                                             
|Interest Expense(b)                           |                                           |                    | (8,436  | )        |  |           | (165    | )             |  |            | (4,920  | )            |   |   | (13,937   | )       |  |   | (38,120 | )      |   |   | (54,525   | )        
|                                             
|                                             
|                                             
|                                             
|Income Taxes                                  |                                           |                    | 8,721   |          |  |           | 6,341   |               |  |            | (1,180  | )            |   |   | (1,675    | )       |  |   | (12,105 | )      |   |   | 47,136    |          
|                                             
|                                             
|                                             
|                                             
|Net Income (Loss)                             |                                           |                    | 17,070  |          |  |           | 12,409  |               |  |            | (1,308  | )            |   |   | 45,884    |         |  |   | (21,911 | )      |   |   | 81,085    |          
|                                             
|                                             
|                                             
|                                             
|Total Assets                                  |                                           |                    | 391,550 |          |  |           | 208,421 |               |  |            | 313,669 |              |   |   | 1,237,813 |         |  |   | 97,819  |        |   |   | 2,167,637 |          
|                                             
|                                             
|                                             
|                                             
|Investments in and Advances to Joint Ventures |                                           |                    | 323,597 |          |  |           | 180,127 |               |  |            | 25,159  |              |   |   |          |         |  |   | 19,252  |        |   |   | 8,841     |          
|                                             
|                                             
|                                             
|                                             
|Capital Expenditures                          |                                           |                    | 19,491  |          |  |           | 4,823   |               |  |            | 663     |              |   |   | 374,997   |         |  |   | 4,951   |        |   |   | 157,732   |          
|                                             
|                                             
|                                             
|                                             
|Capital Investments                           |                                           |                    | 171,735 |          |  |           | 243,231 |               |  |            | 3,893   |              |   |   | 374,997   |         |  |   | 5,425   |        |   |   | 160,329   |          

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                                              |                                           |              |          |              |   |   |           |           | 
|--------------------------------------------- | ----------------------------------------- | ------------ | -------- | ------------ | - | - | --------- | --------- | 
|                                              |                                           | Eliminations |          | Consolidated
|                                              |                                           | & Other      |          | Total       
|(in Thousands)                                |                                           |              |          |             
|1997                                          |                                           |              |          |              |   |   |           |          
|                                             
|                                             
|                                             
|                                             
|Revenues From Unaffiliated Customers          |                                           | $            |         |              |   | $ | 2,207,867 |          
|                                             
|                                             
|                                             
|                                             
|Revenues From Affiliated Customers            |                                           |              | (175,133 | )            |   |   |          |          
|                                              |                                           |              |          |              |   |   |           |          
|                                              | Total operating revenues                  |              |          | (175,133     | ) |   |           | 2,207,867 | 
|                                              |                                           |              |          |              |   |   |           |          
|Depreciation, Depletion and Amortization      |                                           |              |         |              |   |   | 181,612   |          
|                                             
|                                             
|                                             
|                                             
|Operating Income (Loss)                       |                                           |              |         |              |   |   | 222,390   |          
|                                             
|                                             
|                                             
|                                             
|Equity in Earnings of Joint Ventures          |                                           |              |         |              |   |   | 55,659    |          
|                                              |                                           |              |          |              |   |   |           |          
|                                              | Operating and joint venture income (loss) |              |          |             |   |   |           | 278,049   | 
|                                              |                                           |              |          |              |   |   |           |          
|Interest Income                               |                                           |              | (33,650  | )            |   |   | 11,166    |          
|                                             
|                                             
|                                             
|                                             
|Interest Expense(b)                           |                                           |              | 33,650   |              |   |   | (86,453   | )        
|                                             
|                                             
|                                             
|                                             
|Income Taxes                                  |                                           |              |         |              |   |   | 47,238    |          
|                                             
|                                             
|                                             
|                                             
|Net Income (Loss)                             |                                           |              |         |              |   |   | 133,229   |          
|                                             
|                                             
|                                             
|                                             
|Total Assets                                  |                                           |              | (85,972  | )            |   |   | 4,330,937 |          
|                                             
|                                             
|                                             
|                                             
|Investments in and Advances to Joint Ventures |                                           |              |         |              |   |   | 556,976   |          
|                                             
|                                             
|                                             
|                                             
|Capital Expenditures                          |                                           |              |         |              |   |   | 562,657   |          
|                                             
|                                             
|                                             
|                                             
|Capital Investments                           |                                           |              |         |              |   |   | 959,610   |          




|    |                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | Corporate & Other includes administrative and
	financing expenses associated with corporate activities as well
	as development and management activities of real estate
	partnerships.

|    |                                                                                                                                                                            
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(b) | Interest expense is allocated from Corporate &
	 Other to each Diversified Energy segment based on an imputed
	debt structure reflective of the segments related industry.

99



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


19.  CONSOLIDATING FINANCIAL STATEMENTS

Debt securities issued by MCNEE are subject to a support
agreement between MCN and MCNEE, under which MCN has committed to
 make payments of interest and principal on MCNEEs
securities in the event of failure to pay by MCNEE. Restrictions
in the support agreement prohibit recourse on the part of
MCNEEs investors against the stock and assets of MichCon.
Under the terms of the support agreement, the assets of MCN,
other than MichCon, and the cash dividends paid to MCN by any of
its subsidiaries are available as recourse to holders of
MCNEEs securities. The carrying value of MCNs assets
on an unconsolidated basis, primarily investments in its
subsidiaries other than MichCon, is $732,576,000 at
December 31, 1999.

The following MCN consolidating financial statements are
presented and include separately MCNEE, MichCon and MCN and other
 subsidiaries. MCN has determined that separate financial
statements and other disclosures concerning MCNEE are not
material to investors. The other MCN subsidiaries represent
Citizens Gas Fuel Company, MCN Michigan Limited Partnership, MCN
Financing I, MCN Financing III, MCN Financing V,
MCN Financing VI, MichCon Enterprises, Inc. and Blue Lake
Holdings, Inc. until its sale on December 31, 1997.

100



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF FINANCIAL POSITION

|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |           |        | 
|-------------------------------------------------------------- | ---------------------------------------------------- | -------------------------------------- | --------- | ------ | --- | ------------ | --------- | ------------ | ----- | ----- | --------- | --------- | ------ | - | ---------- | ------- | - | - | --------- | --------- | ------ | 
|                                                               |                                                      |                                       
|                                                               |                                                      | December 31, 1999                     
|                                                               |                                                      |                                       
|                                                               |                                                      | MCN                                    |           |        |     | Eliminations |           |             
|                                                               |                                                      | and Other                              |           |        |     | and          |           | Consolidated
|                                                               |                                                      | Subsidiaries                           |           | MCNEE  |     | MichCon      |           | Reclasses    |       | Total
|(in Thousands)                                                 |                                                      |                                        |           |        |     |              |           |              |       |      
|ASSETS                                                         |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|Current Assets                                                 |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash and cash equivalents, at cost                   |                                        | $         | 470    |     |              | $         | 49,191       |       |       | $         | 9,705     |        |   | $          |        |   |   | $         | 59,366    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts receivable                                  |                                        |           | 23,989 |     |              |           | 404,299      |       |       |           | 165,189   |        |   |            | (26,068 | ) |   |           | 567,409   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                      | Less  Allowance for doubtful accounts |           |        | 176 |              |           |              | 2,767 |       |           |           | 17,777 |   |            |         |  |   |           |           | 20,720 | 
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                               | Accounts receivable, net                             |                                        |           | 23,813 |     |              |           | 401,532      |       |       |           | 147,412   |        |   |            | (26,068 | ) |   |           | 546,689   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued unbilled revenues                            |                                        |           | 1,573  |     |              |           |             |       |       |           | 98,866    |        |   |            |        |   |   |           | 100,439   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas in inventory                                     |                                        |           |       |     |              |           | 106,222      |       |       |           | 74,150    |        |   |            |        |   |   |           | 180,372   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property taxes assessed applicable to future periods |                                        |           | 277    |     |              |           | 1,785        |       |       |           | 60,589    |        |   |            |        |   |   |           | 62,651    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                |                                        |           | (878   | )   |              |           | 44,024       |       |       |           |          |        |   |            | (10,638 | ) |   |           | 32,508    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                |                                        |           | 9,938  |     |              |           | 17,728       |       |       |           | 31,594    |        |   |            | (7,947  | ) |   |           | 51,313    |       
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 35,193    |        |     |              | 620,482   |              |       |       | 422,316   |           |        |   | (44,653    | )       |   |   | 1,033,338 |          
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|Deferred Charges and Other Assets                              |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                |                                        |           | (254   | )   |              |           | 114,970      |       |       |           |          |        |   |            | (99,951 | ) |   |           | 14,765    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investments in debt and equity securities            |                                        |           |       |     |              |           | 4,242        |       |       |           | 67,210    |        |   |            | 625     |   |   |           | 72,077    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap losses and receivables                 |                                        |           |       |     |              |           | 43,907       |       |       |           |          |        |   |            |        |   |   |           | 43,907    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred environmental costs                         |                                        |           | 2,534  |     |              |           |             |       |       |           | 28,639    |        |   |            |        |   |   |           | 31,173    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Prepaid benefit costs                                |                                        |           |       |     |              |           |             |       |       |           | 156,290   |        |   |            | (14     | ) |   |           | 156,276   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                |                                        |           | 3,638  |     |              |           | 30,647       |       |       |           | 64,546    |        |   |            | 9,457   |   |   |           | 108,288   |       
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 5,918     |        |     |              | 193,766   |              |       |       | 316,685   |           |        |   | (89,883    | )       |   |   | 426,486   |          
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|Investments in and Advances to Joint Ventures and Subsidiaries |                                                      |                                        | 1,388,386 |        |     |              | 741,960   |              |       |       | 19,115    |           |        |   | (1,385,489 | )       |   |   | 763,972   |          
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|Property, Plant and Equipment                                  |                                                      |                                        | 44,141    |        |     |              | 680,011   |              |       |       | 2,988,318 |           |        |   |           |         |   |   | 3,712,470 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Less  Accumulated depreciation and depletion        |                                        |           | 18,147 |     |              |           | 215,359      |       |       |           | 1,463,706 |        |   |            |        |   |   |           | 1,697,212 |       
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 25,994    |        |     |              | 464,652   |              |       |       | 1,524,612 |           |        |   |           |         |   |   | 2,015,258 |          
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          
|                                                               |                                                      | $                                      | 1,455,491 |        |     | $            | 2,020,860 |              |       | $     | 2,282,728 |           |        | $ | (1,520,025 | )       |   | $ | 4,239,054 |          
|                                                               |                                                      |                                        |           |        |     |              |           |              |       |       |           |           |        |   |            |         |   |   |           |          

101



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF FINANCIAL POSITION

|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |           | 
|-------------------------------------- | --------------------------------------------------------------- | ----------------- | --------- | ------- | - | ------------ | --------- | ------------ |  | ----- | --------- | ------- |  | - | ---------- | ---------- | - | - | --------- | --------- | 
|                                       |                                                                 |                  
|                                       |                                                                 | December 31, 1999
|                                       |                                                                 |                  
|                                       |                                                                 | MCN               |           |         |   | Eliminations |           |             
|                                       |                                                                 | and Other         |           |         |   | and          |           | Consolidated
|                                       |                                                                 | Subsidiaries      |           | MCNEE   |   | MichCon      |           | Reclasses    |  | Total
|(in Thousands)                         |                                                                 |                   |           |         |   |              |           |              |  |      
|LIABILITIES AND CAPITALIZATION         |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|Current Liabilities                    |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Accounts payable                                                |                   | $         | 11,426  |   |              | $         | 215,228      |  |       | $         | 93,549  |  |   | $          | (24,064    | ) |   | $         | 296,139   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Notes payable                                                   |                   |           | 200,721 |   |              |           | 179,249      |  |       |           | 237,785 |  |   |            |           |   |   |           | 617,755   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Current portion of long-term debt and capital lease obligations |                   |           |        |   |              |           | 118          |  |       |           | 27,984  |  |   |            |           |   |   |           | 28,102    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Federal income, property and other taxes payable                |                   |           | (6,343  | ) |              |           | 3,428        |  |       |           | 71,415  |  |   |            |           |   |   |           | 68,500    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Gas payable                                                     |                   |           |        |   |              |           | 21,260       |  |       |           | 3,598   |  |   |            |           |   |   |           | 24,858    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Customer deposits                                               |                   |           | 9       |   |              |           |             |  |       |           | 17,698  |  |   |            |           |   |   |           | 17,707    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                                           |                   |           | 18,935  |   |              |           | 73,910       |  |       |           | 64,741  |  |   |            | (10,637    | ) |   |           | 146,949   | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 224,748   |         |   |              | 493,193   |              |  |       | 516,770   |         |  |   | (34,701    | )          |   |   | 1,200,010 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|Deferred Credits and Other Liabilities |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred income taxes                                           |                   |           | (5,678  | ) |              |           |             |  |       |           | 105,351 |  |   |            | (99,673    | ) |   |           |          | 
|                                      
|                                      
|                                      
|                                      
|                                       | Unamortized investment tax credits                              |                   |           | 244     |   |              |           |             |  |       |           | 27,778  |  |   |            |           |   |   |           | 28,022    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Tax benefits amortizable to customers                           |                   |           |        |   |              |           |             |  |       |           | 136,236 |  |   |            |           |   |   |           | 136,236   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred swap gains and payables                                |                   |           |        |   |              |           | 64,962       |  |       |           |        |  |   |            |           |   |   |           | 64,962    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Accrued environmental costs                                     |                   |           | 3,000   |   |              |           |             |  |       |           | 25,068  |  |   |            |           |   |   |           | 28,068    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Minority interest                                               |                   |           |        |   |              |           | 2,380        |  |       |           | 8,716   |  |   |            |           |   |   |           | 11,096    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                                           |                   |           | 11,591  |   |              |           | 33,639       |  |       |           | 46,398  |  |   |            | (15        | ) |   |           | 91,613    | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 9,157     |         |   |              | 100,981   |              |  |       | 349,547   |         |  |   | (99,688    | )          |   |   | 359,997   |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|Capitalization                         |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term debt, including capital lease obligations             |                   |           |        |   |              |           | 776,708      |  |       |           | 680,909 |  |   |            |           |   |   |           | 1,457,617 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Redeemable preferred securities of subsidiaries                 |                   |           | 402,922 |   |              |           |             |  |       |           |        |  |   |            |           |   |   |           | 402,922   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Common shareholders equity                                     |                   |           | 818,664 |   |              |           | 649,978      |  |       |           | 735,502 |  |   |            | (1,385,636 | ) |   |           | 818,508   | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 1,221,586 |         |   |              | 1,426,686 |              |  |       | 1,416,411 |         |  |   | (1,385,636 | )          |   |   | 2,679,047 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 | $                 | 1,455,491 |         |   | $            | 2,020,860 |              |  | $     | 2,282,728 |         |  | $ | (1,520,025 | )          |   | $ | 4,239,054 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          

102



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF FINANCIAL POSITION

|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |           |       | 
|-------------------------------------------------------------- | ---------------------------------------------------- | -------------------------------------- | --------- | ------ | -- | ------------ | --------- | ------------ | --- | ----- | --------- | --------- | ----- | - | ---------- | ------- | - | - | --------- | --------- | ----- | 
|                                                               |                                                      |                                       
|                                                               |                                                      | December 31, 1998                     
|                                                               |                                                      |                                       
|                                                               |                                                      | MCN                                    |           |        |    | Eliminations |           |             
|                                                               |                                                      | and Other                              |           |        |    | and          |           | Consolidated
|                                                               |                                                      | Subsidiaries                           |           | MCNEE  |    | MichCon      |           | Reclasses    |     | Total
|(in Thousands)                                                 |                                                      |                                        |           |        |    |              |           |              |     |      
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |      
|                                                              
|                                                              
|                                                              
|                                                              
|ASSETS                                                         |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|Current Assets                                                 |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash and cash equivalents, at cost                   |                                        | $         | 1,400  |    |              | $         | 9,036        |     |       | $         | 6,603     |       |   | $          |        |   |   | $         | 17,039    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts receivable                                  |                                        |           | 10,039 |    |              |           | 265,312      |     |       |           | 151,746   |       |   |            | (17,312 | ) |   |           | 409,785   |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                      | Less  Allowance for doubtful accounts |           |        | 84 |              |           |              | 653 |       |           |           | 8,928 |   |            |         |  |   |           |           | 9,665 | 
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                               | Accounts receivable, net                             |                                        |           | 9,955  |    |              |           | 264,659      |     |       |           | 142,818   |       |   |            | (17,312 | ) |   |           | 400,120   |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued unbilled revenues                            |                                        |           | 1,121  |    |              |           |             |     |       |           | 86,767    |       |   |            |        |   |   |           | 87,888    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas in inventory                                     |                                        |           |       |    |              |           | 90,418       |     |       |           | 56,969    |       |   |            |        |   |   |           | 147,387   |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property taxes assessed applicable to future periods |                                        |           | 214    |    |              |           | 1,172        |     |       |           | 71,165    |       |   |            |        |   |   |           | 72,551    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                |                                        |           | 5,143  |    |              |           | 11,872       |     |       |           | 30,169    |       |   |            | (4,712  | ) |   |           | 42,472    |      
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 17,833    |        |    |              | 377,157   |              |     |       | 394,491   |           |       |   | (22,024    | )       |   |   | 767,457   |          
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|Deferred Charges and Other Assets                              |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                |                                        |           | 3,305  |    |              |           | 128,807      |     |       |           |          |       |   |            | (81,565 | ) |   |           | 50,547    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investments in debt and equity securities            |                                        |           |       |    |              |           | 3,548        |     |       |           | 65,556    |       |   |            | 601     |   |   |           | 69,705    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap losses and receivables                 |                                        |           |       |    |              |           | 63,147       |     |       |           |          |       |   |            |        |   |   |           | 63,147    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred environmental costs                         |                                        |           | 2,604  |    |              |           |             |     |       |           | 28,169    |       |   |            |        |   |   |           | 30,773    |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Prepaid benefit costs                                |                                        |           |       |    |              |           |             |     |       |           | 113,879   |       |   |            | (2,104  | ) |   |           | 111,775   |      
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                |                                        |           | 9,401  |    |              |           | 26,870       |     |       |           | 59,007    |       |   |            | 3,662   |   |   |           | 98,940    |      
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 15,310    |        |    |              | 222,372   |              |     |       | 266,611   |           |       |   | (79,406    | )       |   |   | 424,887   |          
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|Investments in and Advances to Joint Ventures and Subsidiaries |                                                      |                                        | 1,550,770 |        |    |              | 782,471   |              |     |       | 19,343    |           |       |   | (1,549,353 | )       |   |   | 803,231   |          
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|Property, Plant and Equipment                                  |                                                      |                                        | 48,681    |        |    |              | 1,103,716 |              |     |       | 2,889,020 |           |       |   |           |         |   |   | 4,041,417 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Less  Accumulated depreciation and depletion        |                                        |           | 17,210 |    |              |           | 229,944      |     |       |           | 1,396,940 |       |   |            |        |   |   |           | 1,644,094 |      
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                               |                                                      |                                        | 31,471    |        |    |              | 873,772   |              |     |       | 1,492,080 |           |       |   |           |         |   |   | 2,397,323 |          
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          
|                                                               |                                                      | $                                      | 1,615,384 |        |    | $            | 2,255,772 |              |     | $     | 2,172,525 |           |       | $ | (1,650,783 | )       |   | $ | 4,392,898 |          
|                                                               |                                                      |                                        |           |        |    |              |           |              |     |       |           |           |       |   |            |         |   |   |           |          

103



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF FINANCIAL POSITION

|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |           | 
|-------------------------------------- | --------------------------------------------------------------- | ----------------- | --------- | ------- | - | ------------ | --------- | ------------ |  | ----- | --------- | ------- |  | - | ---------- | ---------- | - | - | --------- | --------- | 
|                                       |                                                                 |                  
|                                       |                                                                 | December 31, 1998
|                                       |                                                                 |                  
|                                       |                                                                 | MCN               |           |         |   | Eliminations |           |             
|                                       |                                                                 | and Other         |           |         |   | and          |           | Consolidated
|                                       |                                                                 | Subsidiaries      |           | MCNEE   |   | MichCon      |           | Reclasses    |  | Total
|(in Thousands)                         |                                                                 |                   |           |         |   |              |           |              |  |      
|                                       |                                                                 |                   |           |         |   |              |           |              |  |      
|                                      
|                                      
|                                      
|                                      
|LIABILITIES AND CAPITALIZATION         |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|Current Liabilities                    |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Accounts payable                                                |                   | $         | 4,123   |   |              | $         | 218,851      |  |       | $         | 98,891  |  |   | $          | (17,516    | ) |   | $         | 304,349   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Notes payable                                                   |                   |           | 260,771 |   |              |           | 137,762      |  |       |           | 221,169 |  |   |            | (851       | ) |   |           | 618,851   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Current portion of long-term debt and capital lease obligations |                   |           |        |   |              |           | 211,433      |  |       |           | 58,288  |  |   |            |           |   |   |           | 269,721   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Federal income, property and other taxes payable                |                   |           | 1,441   |   |              |           | 6,965        |  |       |           | 61,059  |  |   |            |           |   |   |           | 69,465    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred gas cost recovery revenues                             |                   |           |        |   |              |           |             |  |       |           | 14,980  |  |   |            |           |   |   |           | 14,980    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Gas payable                                                     |                   |           |        |   |              |           | 17,332       |  |       |           | 25,337  |  |   |            |           |   |   |           | 42,669    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Customer deposits                                               |                   |           | 22      |   |              |           |             |  |       |           | 18,769  |  |   |            |           |   |   |           | 18,791    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                                           |                   |           | 18,337  |   |              |           | 25,276       |  |       |           | 67,222  |  |   |            | (2,525     | ) |   |           | 108,310   | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 284,694   |         |   |              | 617,619   |              |  |       | 565,715   |         |  |   | (20,892    | )          |   |   | 1,447,136 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|Deferred Credits and Other Liabilities |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred income taxes                                           |                   |           | (10,308 | ) |              |           |             |  |       |           | 88,567  |  |   |            | (78,259    | ) |   |           |          | 
|                                      
|                                      
|                                      
|                                      
|                                       | Unamortized investment tax credits                              |                   |           | 272     |   |              |           |             |  |       |           | 29,784  |  |   |            |           |   |   |           | 30,056    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Tax benefits amortizable to customers                           |                   |           |        |   |              |           |             |  |       |           | 130,120 |  |   |            |           |   |   |           | 130,120   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Deferred swap gains and payables                                |                   |           |        |   |              |           | 62,956       |  |       |           |        |  |   |            |           |   |   |           | 62,956    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Accrued environmental costs                                     |                   |           | 3,000   |   |              |           |             |  |       |           | 32,000  |  |   |            |           |   |   |           | 35,000    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Minority interest                                               |                   |           |        |   |              |           | 2,697        |  |       |           | 8,201   |  |   |            |           |   |   |           | 10,898    | 
|                                      
|                                      
|                                      
|                                      
|                                       | Other                                                           |                   |           | 10,435  |   |              |           | 15,741       |  |       |           | 51,460  |  |   |            | (2,197     | ) |   |           | 75,439    | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 3,399     |         |   |              | 81,394    |              |  |       | 340,132   |         |  |   | (80,456    | )          |   |   | 344,469   |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|Capitalization                         |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                      
|                                      
|                                      
|                                      
|                                       | Long-term debt, including capital lease obligations             |                   |           |        |   |              |           | 687,333      |  |       |           | 619,835 |  |   |            |           |   |   |           | 1,307,168 | 
|                                      
|                                      
|                                      
|                                      
|                                       | Redeemable preferred securities of subsidiaries                 |                   |           | 502,203 |   |              |           |             |  |       |           |        |  |   |            |           |   |   |           | 502,203   | 
|                                      
|                                      
|                                      
|                                      
|                                       | Common shareholders equity                                     |                   |           | 825,088 |   |              |           | 869,426      |  |       |           | 646,843 |  |   |            | (1,549,435 | ) |   |           | 791,922   | 
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 |                   | 1,327,291 |         |   |              | 1,556,759 |              |  |       | 1,266,678 |         |  |   | (1,549,435 | )          |   |   | 2,601,293 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          
|                                       |                                                                 | $                 | 1,615,384 |         |   | $            | 2,255,772 |              |  | $     | 2,172,525 |         |  | $ | (1,650,783 | )          |   | $ | 4,392,898 |          
|                                       |                                                                 |                   |           |         |   |              |           |              |  |       |           |         |  |   |            |            |   |   |           |          

104



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF OPERATIONS

|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |           |  
|----------------------------------------------------------- | ------------------------------------------------- | ------------------------------------- | ------- | ------- | - | ------------ | --------- | ------------ | - | ----- | --------- | ------- | - | - | ------- | ------- | - | - | --------- | --------- | -
|                                                            |                                                   |                                      
|                                                            |                                                   | Twelve Months Ended December 31, 1999
|                                                            |                                                   |                                      
|                                                            |                                                   | MCN                                   |         |         |   | Eliminations |           |             
|                                                            |                                                   | and Other                             |         |         |   | and          |           | Consolidated
|                                                            |                                                   | Subsidiaries                          |         | MCNEE   |   | MichCon      |           | Reclasses    |   | Total
|(in Thousands)                                              |                                                   |                                       |         |         |   |              |           |              |   |      
|Operating Revenues                                          |                                                   | $                                     | 34,934  |         |   | $            | 1,324,689 |              |   | $     | 1,135,739 |         |   | $ | (14,294 | )       |   | $ | 2,481,068 |          
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Operating Expenses                                          |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cost of sales                                     |                                       |         | 23,456  |   |              |           | 1,118,593    |   |       |           | 483,925 |   |   |         | (10,982 | ) |   |           | 1,614,992 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Operation and maintenance                         |                                       |         | (1,727  | ) |              |           | 150,158      |   |       |           | 266,104 |   |   |         | (3,312  | ) |   |           | 411,223   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation, depletion and amortization          |                                       |         | 3,133   |   |              |           | 62,626       |   |       |           | 98,879  |   |   |         |        |   |   |           | 164,638   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property and other taxes                          |                                       |         | 1,621   |   |              |           | 10,346       |   |       |           | 45,230  |   |   |         |        |   |   |           | 57,197    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property write-downs and restructuring charges    |                                       |         |        |   |              |           | 59,335       |   |       |           |        |   |   |         |        |   |   |           | 59,335    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Merger costs                                      |                                       |         | 371     |   |              |           | 9,055        |   |       |           | 25,429  |   |   |         |        |   |   |           | 34,855    |  
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                   |                                       | 26,854  |         |   |              | 1,410,113 |              |   |       | 919,567   |         |   |   | (14,294 | )       |   |   | 2,342,240 |          
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Operating Income (Loss)                                     |                                                   |                                       | 8,080   |         |   |              | (85,424   | )            |   |       | 216,172   |         |   |   |        |         |   |   | 138,828   |          
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Equity in Earnings of Joint Ventures                        |                                                   |                                       | (27,895 | )       |   |              | 50,428    |              |   |       | 1,976     |         |   |   | 27,877  |         |   |   | 52,386    |          
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Other Income and (Deductions)                               |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest income                                   |                                       |         | 41,383  |   |              |           | 4,238        |   |       |           | 2,604   |   |   |         | (41,650 | ) |   |           | 6,575     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest on long-term debt                        |                                       |         | 808     |   |              |           | (42,974      | ) |       |           | (47,265 | ) |   |         |        |   |   |           | (89,431   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other interest expense                            |                                       |         | (12,102 | ) |              |           | (51,262      | ) |       |           | (8,626  | ) |   |         | 41,648  |   |   |           | (30,342   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Dividends on preferred securities of subsidiaries |                                       |         |        |   |              |           |             |   |       |           |        |   |   |         | (40,139 | ) |   |           | (40,139   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Loss on sale of E&P properties                    |                                       |         |        |   |              |           | (81,989      | ) |       |           |        |   |   |         |        |   |   |           | (81,989   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Investment and contract losses                    |                                       |         |        |   |              |           | (9,903       | ) |       |           |        |   |   |         |        |   |   |           | (9,903    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Minority interest                                 |                                       |         |        |   |              |           | (592         | ) |       |           | (1,020  | ) |   |         |        |   |   |           | (1,612    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other                                             |                                       |         | 840     |   |              |           | 18,124       |   |       |           | (1,016  | ) |   |         |        |   |   |           | 17,948    |  
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                   |                                       | 30,929  |         |   |              | (164,358  | )            |   |       | (55,323   | )       |   |   | (40,141 | )       |   |   | (228,893  | )        
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Income Taxes                           |                                                   |                                       | 11,114  |         |   |              | (199,354  | )            |   |       | 162,825   |         |   |   | (12,264 | )       |   |   | (37,679   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Income Tax Provision (Benefit)                              |                                                   |                                       | 1,823   |         |   |              | (68,015   | )            |   |       | 56,489    |         |   |   |        |         |   |   | (9,703    | )        
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Cumulative Effect of Accounting Change |                                                   |                                       | 9,291   |         |   |              | (131,339  | )            |   |       | 106,336   |         |   |   | (12,264 | )       |   |   | (27,976   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Cumulative Effect of Accounting Change, Net of Taxes        |                                                   |                                       |        |         |   |              | (2,872    | )            |   |       |          |         |   |   |        |         |   |   | (2,872    | )        
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss)                                           |                                                   |                                       | 9,291   |         |   |              | (134,211  | )            |   |       | 106,336   |         |   |   | (12,264 | )       |   |   | (30,848   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Dividends on Preferred Securities                           |                                                   |                                       | 40,139  |         |   |              |          |              |   |       |          |         |   |   | (40,139 | )       |   |   |          |          
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss) Available for Common  Stock               |                                                   | $                                     | (30,848 | )       |   | $            | (134,211  | )            |   | $     | 106,336   |         |   | $ | 27,875  |         |   | $ | (30,848   | )        
|                                                            |                                                   |                                       |         |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          

105



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF OPERATIONS

|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |           |  
|-------------------------------------------- | ------------------------------------------------- | ------------------------------------- | -------- | ------- | - | ------------ | --------- | ------------ | - | ----- | --------- | ------- | - | - | ------- | ------- | - | - | --------- | --------- | -
|                                             |                                                   |                                      
|                                             |                                                   | Twelve Months Ended December 31, 1998
|                                             |                                                   |                                      
|                                             |                                                   | MCN                                   |          |         |   | Eliminations |           |             
|                                             |                                                   | and Other                             |          |         |   | and          |           | Consolidated
|                                             |                                                   | Subsidiaries                          |          | MCNEE   |   | MichCon      |           | Reclasses    |   | Total
|(in Thousands)                               |                                                   |                                       |          |         |   |              |           |              |   |      
|Operating Revenues                           |                                                   | $                                     | 18,262   |         |   | $            | 992,828   |              |   | $     | 1,033,658 |         |   | $ | (14,050 | )       |   | $ | 2,030,698 |          
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Operating Expenses                           |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                            
|                                            
|                                            
|                                            
|                                             | Cost of sales                                     |                                       |          | 10,706  |   |              |           | 752,207      |   |       |           | 451,529 |   |   |         | (8,668  | ) |   |           | 1,205,774 |  
|                                            
|                                            
|                                            
|                                            
|                                             | Operation and maintenance                         |                                       |          | (10,207 | ) |              |           | 152,607      |   |       |           | 252,397 |   |   |         | (5,382  | ) |   |           | 389,415   |  
|                                            
|                                            
|                                            
|                                            
|                                             | Depreciation, depletion and amortization          |                                       |          | 3,206   |   |              |           | 83,401       |   |       |           | 92,883  |   |   |         |        |   |   |           | 179,490   |  
|                                            
|                                            
|                                            
|                                            
|                                             | Property and other taxes                          |                                       |          | 1,719   |   |              |           | 12,396       |   |       |           | 55,438  |   |   |         |        |   |   |           | 69,553    |  
|                                            
|                                            
|                                            
|                                            
|                                             | Property write-downs and restructuring charges    |                                       |          | 8,669   |   |              |           | 558,849      |   |       |           | 24,800  |   |   |         |        |   |   |           | 592,318   |  
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                             |                                                   |                                       | 14,093   |         |   |              | 1,559,460 |              |   |       | 877,047   |         |   |   | (14,050 | )       |   |   | 2,436,550 |          
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Operating Income (Loss)                      |                                                   |                                       | 4,169    |         |   |              | (566,632  | )            |   |       | 156,611   |         |   |   |        |         |   |   | (405,852  | )        
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Equity in Earnings of Joint Ventures         |                                                   |                                       | (282,284 | )       |   |              | 61,242    |              |   |       | 1,946     |         |   |   | 281,321 |         |   |   | 62,225    |          
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Other Income and (Deductions)                |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                            
|                                            
|                                            
|                                            
|                                             | Interest income                                   |                                       |          | 37,408  |   |              |           | 6,609        |   |       |           | 5,688   |   |   |         | (38,812 | ) |   |           | 10,893    |  
|                                            
|                                            
|                                            
|                                            
|                                             | Interest on long-term debt                        |                                       |          | (641    | ) |              |           | (41,821      | ) |       |           | (44,884 | ) |   |         |        |   |   |           | (87,346   | )
|                                            
|                                            
|                                            
|                                            
|                                             | Other interest expense                            |                                       |          | (2,474  | ) |              |           | (48,630      | ) |       |           | (12,113 | ) |   |         | 38,813  |   |   |           | (24,404   | )
|                                            
|                                            
|                                            
|                                            
|                                             | Dividends on preferred securities of subsidiaries |                                       |          |        |   |              |           |             |   |       |           |        |   |   |         | (36,370 | ) |   |           | (36,370   | )
|                                            
|                                            
|                                            
|                                            
|                                             | Investment losses                                 |                                       |          | (8,500  | ) |              |           | (6,135       | ) |       |           |        |   |   |         |        |   |   |           | (14,635   | )
|                                            
|                                            
|                                            
|                                            
|                                             | Minority interest                                 |                                       |          |        |   |              |           | 265          |   |       |           | 5,727   |   |   |         |        |   |   |           | 5,992     |  
|                                            
|                                            
|                                            
|                                            
|                                             | Other                                             |                                       |          | (605    | ) |              |           | 20,348       |   |       |           | (182    | ) |   |         |        |   |   |           | 19,561    |  
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|                                             |                                                   |                                       | 25,188   |         |   |              | (69,364   | )            |   |       | (45,764   | )       |   |   | (36,369 | )       |   |   | (126,309  | )        
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Income Taxes            |                                                   |                                       | (252,927 | )       |   |              | (574,754  | )            |   |       | 112,793   |         |   |   | 244,952 |         |   |   | (469,936  | )        
|                                            
|                                            
|                                            
|                                            
|Income Tax Provision (Benefit)               |                                                   |                                       | (2,829   | )       |   |              | (216,456  | )            |   |       | 35,817    |         |   |   |        |         |   |   | (183,468  | )        
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss)                            |                                                   |                                       | (250,098 | )       |   |              | (358,298  | )            |   |       | 76,976    |         |   |   | 244,952 |         |   |   | (286,468  | )        
|                                            
|                                            
|                                            
|                                            
|Dividends on Preferred Securities            |                                                   |                                       | 36,370   |         |   |              |          |              |   |       |          |         |   |   | (36,370 | )       |   |   |          |          
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss) Available for Common Stock |                                                   | $                                     | (286,468 | )       |   | $            | (358,298  | )            |   | $     | 76,976    |         |   | $ | 281,322 |         |   | $ | (286,468  | )        
|                                             |                                                   |                                       |          |         |   |              |           |              |   |       |           |         |   |   |         |         |   |   |           |          

106



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONSOLIDATING STATEMENT OF OPERATIONS

|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |           |  
|--------------------------------------------- | ------------------------------------------------- | ------------------------------------- | ------- | ------ | - | ------------ | ------- | ------------ | - | ----- | --------- | ------- | - | - | -------- | ------- | - | - | --------- | --------- | -
|                                              |                                                   |                                      
|                                              |                                                   | Twelve Months Ended December 31, 1997
|                                              |                                                   |                                      
|                                              |                                                   | MCN                                   |         |        |   | Eliminations |         |             
|                                              |                                                   | and Other                             |         |        |   | and          |         | Consolidated
|                                              |                                                   | Subsidiaries                          |         | MCNEE  |   | MichCon      |         | Reclasses    |   | Total
|(in Thousands)                                |                                                   |                                       |         |        |   |              |         |              |   |      
|Operating Revenues                            |                                                   | $                                     | 17,607  |        |   | $            | 951,269 |              |   | $     | 1,253,679 |         |   | $ | (14,688  | )       |   | $ | 2,207,867 |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Operating Expenses                            |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Cost of sales                                     |                                       |         | 9,749  |   |              |         | 703,145      |   |       |           | 632,229 |   |   |          | (10,090 | ) |   |           | 1,335,033 |  
|                                             
|                                             
|                                             
|                                             
|                                              | Operation and maintenance                         |                                       |         | 2,281  |   |              |         | 113,018      |   |       |           | 282,640 |   |   |          | (4,598  | ) |   |           | 393,341   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Depreciation, depletion and amortization          |                                       |         | 2,279  |   |              |         | 75,630       |   |       |           | 103,703 |   |   |          |        |   |   |           | 181,612   |  
|                                             
|                                             
|                                             
|                                             
|                                              | Property and other taxes                          |                                       |         | 1,679  |   |              |         | 13,068       |   |       |           | 60,744  |   |   |          |        |   |   |           | 75,491    |  
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|                                              |                                                   |                                       | 15,988  |        |   |              | 904,861 |              |   |       | 1,079,316 |         |   |   | (14,688  | )       |   |   | 1,985,477 |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Operating Income (Loss)                       |                                                   |                                       | 1,619   |        |   |              | 46,408  |              |   |       | 174,363   |         |   |   |         |         |   |   | 222,390   |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Equity in Earnings of Joint Ventures          |                                                   |                                       | 135,757 |        |   |              | 52,356  |              |   |       | 1,199     |         |   |   | (133,653 | )       |   |   | 55,659    |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Other Income and (Deductions)                 |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Interest income                                   |                                       |         | 32,857 |   |              |         | 6,378        |   |       |           | 4,659   |   |   |          | (32,728 | ) |   |           | 11,166    |  
|                                             
|                                             
|                                             
|                                             
|                                              | Interest on long-term debt                        |                                       |         | 408    |   |              |         | (30,052      | ) |       |           | (45,526 | ) |   |          |        |   |   |           | (75,170   | )
|                                             
|                                             
|                                             
|                                             
|                                              | Other interest expense                            |                                       |         | (1,253 | ) |              |         | (34,382      | ) |       |           | (8,664  | ) |   |          | 33,016  |   |   |           | (11,283   | )
|                                             
|                                             
|                                             
|                                             
|                                              | Dividends on preferred securities of subsidiaries |                                       |         |       |   |              |         |             |   |       |           |        |   |   |          | (31,090 | ) |   |           | (31,090   | )
|                                             
|                                             
|                                             
|                                             
|                                              | Minority interest                                 |                                       |         |       |   |              |         | (82          | ) |       |           | (1,882  | ) |   |          |        |   |   |           | (1,964    | )
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                             |                                       |         | 74     |   |              |         | 10,149       |   |       |           | 536     |   |   |          |        |   |   |           | 10,759    |  
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|                                              |                                                   |                                       | 32,086  |        |   |              | (47,989 | )            |   |       | (50,877   | )       |   |   | (30,802  | )       |   |   | (97,582   | )        
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Income (Loss) Before Income Taxes             |                                                   |                                       | 169,462 |        |   |              | 50,775  |              |   |       | 124,685   |         |   |   | (164,455 | )       |   |   | 180,467   |          
|                                             
|                                             
|                                             
|                                             
|Income Tax Provision (Benefit)                |                                                   |                                       | 2,573   |        |   |              | (1,000  | )            |   |       | 45,665    |         |   |   |         |         |   |   | 47,238    |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Net Income (Loss)                             |                                                   |                                       | 166,889 |        |   |              | 51,775  |              |   |       | 79,020    |         |   |   | (164,455 | )       |   |   | 133,229   |          
|                                             
|                                             
|                                             
|                                             
|Dividends on Preferred Securities             |                                                   |                                       | 31,090  |        |   |              |        |              |   |       |          |         |   |   | (31,090  | )       |   |   |          |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          
|Net Income (Loss) Available for Common  Stock |                                                   | $                                     | 135,799 |        |   | $            | 51,775  |              |   | $     | 79,020    |         |   | $ | (133,365 | )       |   | $ | 133,229   |          
|                                              |                                                   |                                       |         |        |   |              |         |              |   |       |           |         |   |   |          |         |   |   |           |          

107



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS



---

|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |          |          |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | ------ | -------- | -------- | ------------ | ------ | ------------ | -------- | ----- | ------- | -------- | -------- | - | ------- | -------- | ------- | - | ------- | -------- | -------- | -
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | Twelve Months Ended December 31, 1999                 
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | MCN                                                    |        |          |          | Eliminations |        |             
|                                                     |                                                                              | and Other                                              |        |          |          | and          |        | Consolidated
|                                                     |                                                                              | Subsidiaries                                           |        | MCNEE    |          | MichCon      |        | Reclasses    |          | Total
|(in Thousands)                                       |                                                                              |                                                        |        |          |          |              |        |              |          |      
|Net Cash Flow From Operating Activities              |                                                                              | $                                                      | 57,315 |          |          | $            | 16,001 |              |          | $     | 120,589 |          |          | $ | (63,618 | )        |         | $ | 130,287 |         
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|Cash Flow From Financing Activities                  |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                           |                                                        |        | (60,050  | )        |              |        | 41,487       |          |       |         | 16,616   |          |   |         | 851      |         |   |         | (1,096   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital contributions received from (distributions paid to)
	affiliates, net |                                                        |        |         |          |              |        | (101,657     | )        |       |         |         |          |   |         | 101,657  |         |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                               |                                                        |        | (86,256  | )        |              |        |             |          |       |         | (17,500  | )        |   |         | 17,500   |         |   |         | (86,256  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred securities dividends paid                                          |                                                        |        | (40,139  | )        |              |        |             |          |       |         |         |          |   |         | 40,139   |         |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                     |                                                        |        | 136,145  |          |              |        |             |          |       |         |         |          |   |         |         |         |   |         | 136,145  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reacquisition of common stock                                                |                                                        |        | (6,745   | )        |              |        |             |          |       |         |         |          |   |         |         |         |   |         | (6,745   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of long-term debt                                                   |                                                        |        |         |          |              |        |             |          |       |         | 106,535  |          |   |         |         |         |   |         | 106,535  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net                          |                                                        |        |         |          |              |        | 92,344       |          |       |         |         |          |   |         |         |         |   |         | 92,344   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities                        |                                                        |        | (103,093 | )        |              |        | (213,599     | )        |       |         | (79,097  | )        |   |         |         |         |   |         | (395,789 | )       
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) financing activities |        |          | (160,138 | )            |        |              | (181,425 | )     |         |          | 26,554   |   |         |          | 160,147 |   |         |          | (154,862 | )
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|Cash Flow From Investing Activities                  |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                         |                                                        |        | (1,245   | )        |              |        | (157,080     | )        |       |         | (135,933 | )        |   |         |         |         |   |         | (294,258 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions                                                                 |                                                        |        |         |          |              |        | (29,551      | )        |       |         |         |          |   |         |         |         |   |         | (29,551  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                |                                                        |        |         |          |              |        | (2,479       | )        |       |         | (1,654   | )        |   |         | (24      | )       |   |         | (4,157   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures and subsidiaries                                |                                                        |        | 100,218  |          |              |        | (76,090      | )        |       |         | 102      |          |   |         | (101,657 | )       |   |         | (77,427  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests                                 |                                                        |        |         |          |              |        | 472,007      |          |       |         |         |          |   |         | (1,103   | )       |   |         | 470,904  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        | 2,920    |          |              |        | (1,228       | )        |       |         | (6,556   | )        |   |         | 6,255    |         |   |         | 1,391    |         
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) investing activities |        |          | 101,893  |              |        |              | 205,579  |       |         |          | (144,041 | ) |         |          | (96,529 | ) |         |          | 66,902   |  
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                              |                                                        | (930   | )        |          |              | 40,155 |              |          |       | 3,102   |          |          |   |        |          |         |   | 42,327  |         
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                              |                                                        | 1,400  |          |          |              | 9,036  |              |          |       | 6,603   |          |          |   |        |          |         |   | 17,039  |         
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         
|Cash and Cash Equivalents, December 31               |                                                                              | $                                                      | 470    |          |          | $            | 49,191 |              |          | $     | 9,705   |          |          | $ |        |          |         | $ | 59,366  |         
|                                                     |                                                                              |                                                        |        |          |          |              |        |              |          |       |         |          |          |   |         |          |         |   |         |         

108



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONTINUED)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |          |          |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | ------ | -------- | -------- | ------------ | ------- | ------------ | -------- | ----- | ------- | -------- | -------- | - | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | Twelve Months Ended December 31, 1998                 
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | MCN                                                    |        |          |          | Eliminations |         |             
|                                                     |                                                                              | and Other                                              |        |          |          | and          |         | Consolidated
|                                                     |                                                                              | Subsidiaries                                           |        | MCNEE    |          | MichCon      |         | Reclasses    |          | Total
|(in Thousands)                                       |                                                                              |                                                        |        |          |          |              |         |              |          |      
|Net Cash Flow From Operating Activities              |                                                                              | $                                                      | 72,476 |          |          | $            | (68,749 | )            |          | $     | 217,918 |          |          | $ | (68,923 | )        |          | $ | 152,722 |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash Flow From Financing Activities                  |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                           |                                                        |        | 260,771  |          |              |         | 65,006       |          |       |         | (20,522  | )        |   |         | 2,227    |          |   |         | 307,482  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital contributions received from (distributions paid to)
	affiliates, net |                                                        |        |         |          |              |         | 236,851      |          |       |         |         |          |   |         | (236,851 | )        |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                               |                                                        |        | (82,239  | )        |              |         |             |          |       |         | (46,084  | )        |   |         | 46,084   |          |   |         | (82,239  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred securities dividends paid                                          |                                                        |        | (17,613  | )        |              |         |             |          |       |         |         |          |   |         | 17,613   |          |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                     |                                                        |        | 20,192   |          |              |         |             |          |       |         |         |          |   |         |         |          |   |         | 20,192   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of preferred securities                                             |                                                        |        | 96,850   |          |              |         |             |          |       |         |         |          |   |         |         |          |   |         | 96,850   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of long-term debt                                                   |                                                        |        |         |          |              |         | 305,709      |          |       |         | 153,052  |          |   |         |         |          |   |         | 458,761  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net                          |                                                        |        |         |          |              |         | 17,299       |          |       |         |         |          |   |         |         |          |   |         | 17,299   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities                        |                                                        |        | (100,365 | )        |              |         | (102,153     | )        |       |         | (126,292 | )        |   |         |         |          |   |         | (328,810 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        |         |          |              |         | 8,243        |          |       |         |         |          |   |         |         |          |   |         | 8,243    |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) financing activities |        |          | 177,596  |              |         |              | 530,955  |       |         |          | (39,846  | ) |         |          | (170,927 | ) |         |          | 497,778  |  
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash Flow From Investing Activities                  |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                         |                                                        |        | (11,024  | )        |              |         | (318,276     | )        |       |         | (153,475 | )        |   |         |         |          |   |         | (482,775 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions                                                                 |                                                        |        |         |          |              |         | (42,429      | )        |       |         |         |          |   |         |         |          |   |         | (42,429  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                |                                                        |        |         |          |              |         | 48,527       |          |       |         | (30,446  | )        |   |         | (250     | )        |   |         | 17,831   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures and subsidiaries                                |                                                        |        | (238,951 | )        |              |         | (187,423     | )        |       |         | 214      |          |   |         | 236,851  |          |   |         | (189,309 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests                                 |                                                        |        | 1,143    |          |              |         | 49,463       |          |       |         |         |          |   |         | (3,421   | )        |   |         | 47,185   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        | 137      |          |              |         | (28,151      | )        |       |         | (2,115   | )        |   |         | 6,670    |          |   |         | (23,459  | )       
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) investing activities |        |          | (248,695 | )            |         |              | (478,289 | )     |         |          | (185,822 | ) |         |          | 239,850  |   |         |          | (672,956 | )
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                              |                                                        | 1,377  |          |          |              | (16,083 | )            |          |       | (7,750  | )        |          |   |        |          |          |   | (22,456 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                              |                                                        | 23     |          |          |              | 25,119  |              |          |       | 14,353  |          |          |   |        |          |          |   | 39,495  |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash and Cash Equivalents, December 31               |                                                                              | $                                                      | 1,400  |          |          | $            | 9,036   |              |          | $     | 6,603   |          |          | $ |        |          |          | $ | 17,039  |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         

109



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONCLUDED)


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |          |          |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | ------ | -------- | -------- | ------------ | ------- | ------------ | -------- | ----- | ------- | -------- | -------- | - | ------- | -------- | -------- | - | ------- | -------- | -------- | -
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | Twelve Months Ended December 31, 1997                 
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | MCN                                                    |        |          |          | Eliminations |         |             
|                                                     |                                                                              | and Other                                              |        |          |          | and          |         | Consolidated
|                                                     |                                                                              | Subsidiaries                                           |        | MCNEE    |          | MichCon      |         | Reclasses    |          | Total
|(in Thousands)                                       |                                                                              |                                                        |        |          |          |              |         |              |          |      
|Net Cash Flow From Operating Activities              |                                                                              | $                                                      | 97,490 |          |          | $            | 148,242 |              |          | $     | 187,263 |          |          | $ | (89,611 | )        |          | $ | 343,384 |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash Flow From Financing Activities                  |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                           |                                                        |        |         |          |              |         | 94,513       |          |       |         | (23,435  | )        |   |         | (3,078   | )        |   |         | 68,000   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital contributions received from (distributions paid to)
	affiliates, net |                                                        |        | (3,985   | )        |              |         | 603,150      |          |       |         |         |          |   |         | (599,165 | )        |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                               |                                                        |        | (72,851  | )        |              |         |             |          |       |         | (40,000  | )        |   |         | 40,000   |          |   |         | (72,851  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred securities dividends paid                                          |                                                        |        | (31,090  | )        |              |         |             |          |       |         |         |          |   |         | 31,090   |          |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                     |                                                        |        | 294,402  |          |              |         |             |          |       |         |         |          |   |         |         |          |   |         | 294,402  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of preferred securities                                             |                                                        |        | 326,521  |          |              |         |             |          |       |         |         |          |   |         |         |          |   |         | 326,521  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of long-term debt                                                   |                                                        |        |         |          |              |         | 149,190      |          |       |         | 124,051  |          |   |         |         |          |   |         | 273,241  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net                          |                                                        |        |         |          |              |         | (261,822     | )        |       |         |         |          |   |         |         |          |   |         | (261,822 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities                        |                                                        |        | (55      | )        |              |         | (32,315      | )        |       |         | (76,854  | )        |   |         |         |          |   |         | (109,224 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        |         |          |              |         | 4,612        |          |       |         |         |          |   |         |         |          |   |         | 4,612    |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) financing activities |        |          | 512,942  |              |         |              | 557,328  |       |         |          | (16,238  | ) |         |          | (531,153 | ) |         |          | 522,879  |  
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash Flow From Investing Activities                  |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                         |                                                        |        | (6,559   | )        |              |         | (399,586     | )        |       |         | (155,208 | )        |   |         | (1       | )        |   |         | (561,354 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions                                                                 |                                                        |        |         |          |              |         | (166,553     | )        |       |         |         |          |   |         |         |          |   |         | (166,553 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                |                                                        |        |         |          |              |         | (48,441      | )        |       |         | (31,375  | )        |   |         | 16,693   |          |   |         | (63,123  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures and subsidiaries                                |                                                        |        | (604,750 | )        |              |         | (151,360     | )        |       |         | (304     | )        |   |         | 603,772  |          |   |         | (152,642 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests                                 |                                                        |        |         |          |              |         | 67,365       |          |       |         |         |          |   |         |         |          |   |         | 67,365   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        | 56       |          |              |         | (1,484       | )        |       |         | 20,205   |          |   |         | 300      |          |   |         | 19,077   |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) investing activities |        |          | (611,253 | )            |         |              | (700,059 | )     |         |          | (166,682 | ) |         |          | 620,764  |   |         |          | (857,230 | )
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                              |                                                        | (821   | )        |          |              | 5,511   |              |          |       | 4,343   |          |          |   |        |          |          |   | 9,033   |         
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                              |                                                        | 844    |          |          |              | 19,608  |              |          |       | 10,010  |          |          |   |        |          |          |   | 30,462  |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         
|Cash and Cash Equivalents, December 31               |                                                                              | $                                                      | 23     |          |          | $            | 25,119  |              |          | $     | 14,353  |          |          | $ |        |          |          | $ | 39,495  |         
|                                                     |                                                                              |                                                        |        |          |          |              |         |              |          |       |         |          |          |   |         |          |          |   |         |         

110



---



##### Table of Contents



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(CONCLUDED)


RESPONSIBILITIES FOR FINANCIAL STATEMENTS

The consolidated financial statements of MCN Energy Group Inc.
were prepared by management which is responsible for their
integrity and objectivity. The statements have been prepared in
conformity with generally accepted accounting principles and, as
such, include amounts based on judgments of management. Financial
 information elsewhere in this Annual Report is consistent with
that in the consolidated financial statements.

Management is further responsible for maintaining a system of
internal accounting controls, designed to provide reasonable
assurance that the books and records reflect the transactions of
MCN and its subsidiaries and that established policies and
procedures are carefully followed. Perhaps the most important
feature in the system of internal control is that it is
continually reviewed for its effectiveness and is augmented by a
strong internal audit program.

Deloitte & Touche LLP, independent auditors, is engaged to
audit the consolidated financial statements of MCN and issue
reports thereon. Their audit is conducted in accordance with
generally accepted auditing standards which comprehends gaining
an understanding of internal accounting controls.

MCNs Board of Directors, through its Audit Committee is
responsible for: (1) assuring that management fulfills its
responsibilities in the preparation of the consolidated financial
 statements, and (2) engaging the independent public
accountants. The Committee reviews the scope of the audits and
the accounting principles being applied in financial reporting.
The independent auditors, representatives of management and the
internal auditors meet regularly (separately and jointly) with
the Committee to review the activities of each and to ensure that
 each is properly discharging its responsibilities.

/s/ ALFRED R. GLANCY III






Chairman and Chief Executive Officer


/s/ STEPHEN E. EWING






President, Chief Operating Officer and Director


/s/ HOWARD L. DOW III






Executive Vice President, Chief Financial Officer and
Treasurer


/s/ GERARD KABZINSKI






Vice President and Controller


111



---



##### Table of Contents



INDEPENDENT AUDITORS REPORT

To the Board of Directors of MCN Energy Group Inc.:

We have audited the accompanying consolidated statements of
financial position of MCN Energy Group Inc. and subsidiaries,
(the Company) as of December 31, 1999 and 1998,
and the related consolidated statements of operations, cash flows
 and common shareholders equity for each of the three years
 in the period ended December 31, 1999. Our audits also
included the consolidated financial statement schedule listed in
Item 8. These financial statements and the financial
statement schedule are the responsibility of the Companys
management. Our responsibility is to express an opinion on these
financial statements and financial statement schedule based on
our audits.

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

In our opinion, the consolidated financial statements referred to
 above present fairly, in all material respects, the financial
position of the Company as of December 31, 1999 and 1998,
and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 1999 in
conformity with generally accepted accounting principles. Also,
in our opinion, such consolidated financial statement schedule,
when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material
respects, the information shown therein.

As discussed in Note 5 to the financial statements, the Company
changed its method of accounting for start-up activities in 1999.

DELOITTE & TOUCHE LLP





112



---



##### Table of Contents



SUPPLEMENTARY FINANCIAL INFORMATION

Quarterly Operating Results (Unaudited)

Due to the seasonal nature of MCNs Gas Distribution
operations, revenues, net income and earnings per share tend to
be higher in the first and fourth quarters of the calendar year.
Quarterly earnings per share may not total for the years, since
quarterly computations are based on weighted average common
shares outstanding during each quarter. There were 20,755 and
21,858 holders of record of MCN common shares at
December 31, 1999 and 1998, respectively.

|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |          |  
|----------------------------------------------------------- | --------------------------------------- | ------- | ------- | ------- | - | ------- | ------- | ------- | - | ---- | ------- | ------- | - | - | ------- | ------- | - | - | --------- | -------- | -
|                                                            |                                         | First   |         | Second  |   | Third   |         | Fourth  |   |     
|                                                            |                                         | Quarter |         | Quarter |   | Quarter |         | Quarter |   | Year
|                                                            |                                         |         |         |         |   |         |         |         |   |     
|                                                            |                                         |         |         |         |   |         |         |        
|(in Thousands of Dollars  Except Per Share Amounts)        |                                         |         |         |         |   |         |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|1999                                                        |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|Operating Revenues                                          |                                         | $       | 796,586 |         |   | $       | 488,784 |         |   | $    | 462,859 |         |   | $ | 732,839 |         |   | $ | 2,481,068 |         
|Operating Income (Loss)                                     |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 153,918 |   |         | $       | 16,927  |   |      | $       | (18,171 | ) |   | $       | 80,344  |   |   | $         | 233,018  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (52,000 | ) |      |         |        |   |   |         | (42,190 | ) |   |           | (94,190  | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 153,918 |         |   | $       | (35,073 | )       |   | $    | (18,171 | )       |   | $ | 38,154  |         |   | $ | 138,828   |         
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Operating and Joint Venture Income (Loss)                   |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 166,376 |   |         | $       | 29,093  |   |      | $       | (2,775  | ) |   | $       | 92,710  |   |   | $         | 285,404  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (52,000 | ) |      |         |        |   |   |         | (42,190 | ) |   |           | (94,190  | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 166,376 |         |   | $       | (22,907 | )       |   | $    | (2,775  | )       |   | $ | 50,520  |         |   | $ | 191,214   |         
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Income (Loss) Before Cumulative Effect of Accounting Change |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 88,415  |   |         | $       | (2,875  | ) |      | $       | (27,334 | ) |   | $       | 34,772  |   |   | $         | 92,978   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (83,365 | ) |      |         | (3,820  | ) |   |         | (33,769 | ) |   |           | (120,954 | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 88,415  |         |   | $       | (86,240 | )       |   | $    | (31,154 | )       |   | $ | 1,003   |         |   | $ | (27,976   | )       
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Net Income (Loss)                                           |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 85,543  |   |         | $       | (2,875  | ) |      | $       | (27,334 | ) |   | $       | 34,772  |   |   | $         | 90,106   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (83,365 | ) |      |         | (3,820  | ) |   |         | (33,769 | ) |   |           | (120,954 | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 85,543  |         |   | $       | (86,240 | )       |   | $    | (31,154 | )       |   | $ | 1,003   |         |   | $ | (30,848   | )       
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Basic Earnings (Loss) Per Share                             |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 1.11    |   |         | $       | (.03    | ) |      | $       | (.32    | ) |   | $       | .41     |   |   | $         | 1.11     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (1.00   | ) |      |         | (.05    | ) |   |         | (.40    | ) |   |           | (1.45    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cumulative effect of accounting change  |         |         | (.04    | ) |         |         |        |   |      |         |        |   |   |         |        |   |   |           | (.03     | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 1.07    |         |   | $       | (1.03   | )       |   | $    | (.37    | )       |   | $ | .01     |         |   | $ | (.37      | )       
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Diluted Earnings (Loss) Per Share                           |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Before unusual charges and merger costs |         | $       | 1.06    |   |         | $       | (.03    | ) |      | $       | (.32    | ) |   | $       | .40     |   |   | $         | 1.11     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Unusual charges and merger costs        |         |         |        |   |         |         | (1.00   | ) |      |         | (.05    | ) |   |         | (.39    | ) |   |           | (1.45    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cumulative effect of accounting change  |         |         | (.04    | ) |         |         |        |   |      |         |        |   |   |         |        |   |   |           | (.03     | )
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                            |                                         | $       | 1.02    |         |   | $       | (1.03   | )       |   | $    | (.37    | )       |   | $ | .01     |         |   | $ | (.37      | )       
|                                                            |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|Dividends Paid Per Share                                    |                                         | $       | .2550   |         |   | $       | .2550   |         |   | $    | .2550   |         |   | $ | .2550   |         |   | $ | 1.0200    |         
|                                                           
|                                                           
|                                                           
|                                                           
|Average Daily Trading Volume                                |                                         |         | 265,050 |         |   |         | 306,259 |         |   |      | 326,253 |         |   |   | 565,749 |         |   |   | 367,264   |         
|Price Per Share                                             |                                         |         |         |         |   |         |         |         |   |      |         |         |   |   |         |         |   |   |           |         
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | High                                    |         | $       | 19.5625 |   |         | $       | 22.6250 |   |      | $       | 22.2500 |   |   | $       | 25.6250 |   |   | $         | 25.6250  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Low                                     |         | $       | 15.8125 |   |         | $       | 15.9375 |   |      | $       | 17.0000 |   |   | $       | 17.0000 |   |   | $         | 15.8125  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Close                                   |         | $       | 16.0625 |   |         | $       | 20.7500 |   |      | $       | 17.1875 |   |   | $       | 23.7500 |   |   | $         | 23.7500  |  

113



---



##### Table of Contents



SUPPLEMENTARY FINANCIAL INFORMATION
(CONCLUDED)

Quarterly Operating Results (Unaudited)

|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |          |  
|----------------------------------------- | ---------------------- | ------- | ------- | ------- |  | ------- | -------- | -------- | - | ---- | -------- | -------- | - | - | ------- | ------- |  | - | --------- | -------- | -
|                                          |                        | First   |         | Second  |  | Third   |          | Fourth   |   |     
|                                          |                        | Quarter |         | Quarter |  | Quarter |          | Quarter  |   | Year
|                                          |                        |         |         |         |  |         |          |          |   |     
|1998                                      |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|Operating Revenues                        |                        | $       | 701,460 |         |  | $       | 406,214  |          |   | $    | 351,145  |          |   | $ | 571,879 |         |  | $ | 2,030,698 |         
|Operating Income (Loss)                   |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | Before unusual charges |         | $       | 116,626 |  |         | $        | 22,040   |   |      | $        | (346     | ) |   | $       | 48,146  |  |   | $         | 186,466  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Unusual charges        |         |         |        |  |         |          | (333,022 | ) |      |          | (259,296 | ) |   |         |        |  |   |           | (592,318 | )
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                          |                        | $       | 116,626 |         |  | $       | (310,982 | )        |   | $    | (259,642 | )        |   | $ | 48,146  |         |  | $ | (405,852  | )       
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|Operating and Joint Venture Income (Loss) |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | Before unusual charges |         | $       | 133,387 |  |         | $        | 33,877   |   |      | $        | 17,617   |   |   | $       | 63,810  |  |   | $         | 248,691  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Unusual charges        |         |         |        |  |         |          | (333,022 | ) |      |          | (259,296 | ) |   |         |        |  |   |           | (592,318 | )
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                          |                        | $       | 133,387 |         |  | $       | (299,145 | )        |   | $    | (241,679 | )        |   | $ | 63,810  |         |  | $ | (343,627  | )       
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|Net Income (Loss)                         |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | Before unusual charges |         | $       | 78,882  |  |         | $        | 7,829    |   |      | $        | (7,578   | ) |   | $       | 23,997  |  |   | $         | 103,130  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Unusual charges        |         |         |        |  |         |          | (220,452 | ) |      |          | (169,146 | ) |   |         |        |  |   |           | (389,598 | )
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                          |                        | $       | 78,882  |         |  | $       | (212,623 | )        |   | $    | (176,724 | )        |   | $ | 23,997  |         |  | $ | (286,468  | )       
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|Basic Earnings (Loss) Per Share           |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | Before unusual charges |         | $       | 1.01    |  |         | $        | .10      |   |      | $        | (.10     | ) |   | $       | .31     |  |   | $         | 1.31     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Unusual charges        |         |         |        |  |         |          | (2.80    | ) |      |          | (2.14    | ) |   |         |        |  |   |           | (4.94    | )
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                          |                        | $       | 1.01    |         |  | $       | (2.70    | )        |   | $    | (2.24    | )        |   | $ | .31     |         |  | $ | (3.63     | )       
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|Diluted Earnings (Loss) Per Share         |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | Before unusual charges |         | $       | .95     |  |         | $        | .10      |   |      | $        | (.10     | ) |   | $       | .30     |  |   | $         | 1.31     |  
|                                         
|                                         
|                                         
|                                         
|                                          | Unusual charges        |         |         |        |  |         |          | (2.80    | ) |      |          | (2.14    | ) |   |         |        |  |   |           | (4.94    | )
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                          |                        | $       | .95     |         |  | $       | (2.70    | )        |   | $    | (2.24    | )        |   | $ | .30     |         |  | $ | (3.63     | )       
|                                          |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|Dividends Paid Per Share                  |                        | $       | .2550   |         |  | $       | .2550    |          |   | $    | .2550    |          |   | $ | .2550   |         |  | $ | 1.0200    |         
|                                         
|                                         
|                                         
|                                         
|Average Daily Trading Volume              |                        |         | 195,997 |         |  |         | 328,005  |          |   |      | 530,228  |          |   |   | 395,530 |         |  |   | 364,558   |         
|Price Per Share                           |                        |         |         |         |  |         |          |          |   |      |          |          |   |   |         |         |  |   |           |         
|                                         
|                                         
|                                         
|                                         
|                                          | High                   |         | $       | 39.8750 |  |         | $        | 39.8750  |   |      | $        | 26.8125  |   |   | $       | 20.8125 |  |   | $         | 39.8750  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Low                    |         | $       | 36.2500 |  |         | $        | 24.7500  |   |      | $        | 16.4375  |   |   | $       | 16.8125 |  |   | $         | 16.4375  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Close                  |         | $       | 37.3750 |  |         | $        | 25.0000  |   |      | $        | 17.0625  |   |   | $       | 19.0625 |  |   | $         | 19.0625  |  

114



---



##### Table of Contents



SCHEDULE II

SCHEDULE II  VALUATION AND
QUALIFYING ACCOUNTS

(Thousands of Dollars)


|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |        | 
|----------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------------------------------- | ---------- | - | --------------------- |  | -------------- | - | ------------- | - | --------- | - | --- |  |  | - | ------ |  |  | - | ------ | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |              
|Column A                                                                                                                                              |                                           | Column B   |   | Column C              |  | Column D       |   | Column E     
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |              
|                                                                                                                                                      |                                           |            |   | Additions             |  |                |   |              
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |              
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |              
|                                                                                                                                                      |                                           |            |   | Provisions charged to |  | Deductions     |   |              
|                                                                                                                                                      |                                           |            |   |                       |  | for Purposes   |   |              
|                                                                                                                                                      |                                           | Balance at |   |                       |  | Utility Plant/ |   | for Which the |   | Balance  
|                                                                                                                                                      |                                           | Beginning  |   |                       |  | Regulatory     |   | Reserves Were |   | at End   
|Description                                                                                                                                           |                                           | of Period  |   | Income                |  | Asset          |   | Provided      |   | of Period
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |          
|Year Ended December 31, 1999                                                                                                                          |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|Reserve Deducted From Assets in Consolidated Statement of
	Financial Position:                                                                        |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Allowance for doubtful accounts           |            | $ | 9,665                 |  |                | $ | 15,882        |   |           | $ |    |  |  | $ | 4,827  |  |  | $ | 20,720 | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                      | Deferred charges and other assets  other |            | $ |                      |  |                | $ | 1,332         |   |           | $ |    |  |  | $ | 1,332  |  |  | $ |       | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserve Included in Current Liabilities  Other and
	Deferred Credits and Other Liabilities  Other in
	Consolidated Statement of Financial Position: |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Restructuring Charge(1)                   |            | $ | 9,730                 |  |                | $ |              |   |           | $ |    |  |  | $ | 5,927  |  |  | $ | 3,803  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserve Included in Current Liabilities  Other and in
	Accrued Environmental Costs in Consolidated Statement of
	Financial Position:                 |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Environmental testing(2)                  |            | $ | 35,092                |  |                | $ |              |   |           | $ |    |  |  | $ | 724    |  |  | $ | 34,368 | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserves Included in Deferred Credits and Other
	Liabilities  Other in Consolidated Statement of
	Financial Position:                                |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Injuries and damages                      |            | $ | 2,515                 |  |                | $ | 1,716         |   |           | $ | 416 |  |  | $ | 1,921  |  |  | $ | 2,726  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Year Ended December 31, 1998                                                                                                                          |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|Reserve Deducted From Assets in Consolidated Statement of
	Financial Position:                                                                        |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Allowance for doubtful accounts           |            | $ | 15,711                |  |                | $ | 13,302        |   |           | $ |    |  |  | $ | 19,348 |  |  | $ | 9,665  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserve Included in Current Liabilities  Other and
	Deferred Credits and Other Liabilities  Other in
	Consolidated Statement of Financial Position: |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Restructuring Charge(1)                   |            | $ |                      |  |                | $ | 10,390        |   |           | $ |    |  |  | $ | 660    |  |  | $ | 9,730  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserve Included in Current Liabilities  Other in
	Consolidated Statement of Financial Position:                                                     |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Environmental testing(2)                  |            | $ | 36,741                |  |                | $ |              |   |           | $ |    |  |  | $ | 1,649  |  |  | $ | 35,092 | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserves Included in Deferred Credits and Other
	Liabilities  Other in Consolidated Statement of
	Financial Position:                                |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Injuries and damages                      |            | $ | 4,838                 |  |                | $ | (328          | ) |           | $ | 438 |  |  | $ | 2,433  |  |  | $ | 2,515  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Year Ended December 31, 1997                                                                                                                          |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|Reserve deducted from Assets in Consolidated Statement of
	Financial Position:                                                                        |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Allowance for doubtful accounts           |            | $ | 18,487                |  |                | $ | 21,847        |   |           | $ |    |  |  | $ | 24,623 |  |  | $ | 15,711 | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserve Included in Current Liabilities  Other in
	Consolidated Statement of Financial Position:                                                     |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Environmental testing                     |            | $ | 37,576                |  |                | $ |              |   |           | $ |    |  |  | $ | 835    |  |  | $ | 36,741 | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|Reserves Included in Deferred Credits and Other
	Liabilities  Other in Consolidated Statement of
	Financial Position:                                |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                     
|                                                                                                                                                      | Injuries and damages                      |            | $ | 9,182                 |  |                | $ | 1,400         |   |           | $ | 608 |  |  | $ | 6,352  |  |  | $ | 4,838  | 
|                                                                                                                                                      |                                           |            |   |                       |  |                |   |               |   |           |   |     |  |  |   |        |  |  |   |       

NOTES:


|    |                                                                                 
|--- | --------------------------------------------------------------------------------
|(1) | Reference is made to Note 3e to the Consolidated
	Financial Statements page 72. 
|(2) | Reference is made to Note 13c to the Consolidated
	Financial Statements page 86.

115



---



##### Table of Contents








|        |                                              
|------- | ---------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ON ACCOUNTING AND FINANCIAL DISCLOSURE


None.

116



---



##### Table of Contents








PART III







ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
OF THE REGISTRANT


Directors of MCN

Alfred R. Glancy III, 62, Director since 1988, Term expires in
 2000:



Mr. Glancy is Chairman Emeritus of Detroit Symphony
Orchestra Inc., and past Chairman of The Detroit Medical Center,
Detroit Renaissance, Detroit Economic Growth Corporation and New
Detroit, Inc. He is also a Director of the Detroit Institute of
Arts, United Way Community Services, Community Foundation for
Southeastern Michigan, Morton Industrial Group, Greater Downtown
Partnership, Interstate Natural Gas Association, National
Petroleum Council, New Detroit and the Hudson-Webber Foundation.
Mr. Glancy is the Chairman of UNICO Investment in Seattle,
Washington.

Frank M. Hennessey, 61, Director since 1988, Term expires in
2000:



Mr. Hennessey is a Trustee of the Hudson-Webber Foundation
and a Director of New Detroit, Inc. He is a Director and
Treasurer of United Way Community Services, and Trustee of the
Citizens Research Council of Michigan, as well as past Chairman
of the Greater Detroit and Windsor Japan American Society.

Howard F. Sims, 66, Director since 1988, Term expires in 2000:



Mr. Sims is a Director of Comerica Incorporated. He is a
Trustee of Citizens Research Council of Michigan, the
W.K. Kellogg Foundation, The Community Foundation of
Southeast Michigan and the Karmanos Cancer Institute.
Mr. Sims is a member of the Executive Board of the Detroit
Area Council, Boy Scouts of America and United Way Community
Services of Southeast Michigan.

James G. Berges, 52, Director since 1998, Term expires in
2001:



117



---



##### Table of Contents





Mr. Berges is a Board Member of the St. Louis Regional
Housing Alliance and has been active in various roles with the
United Way of Greater St. Louis.

Thomas H. Jeffs II, 61, Director since 1991, Term expires in
2001:



Mr. Jeffs is a Trustee of New Detroit, Inc. and a Director
of The Economic Club of Detroit. He is also a Director of
Intermet Corporation. Mr. Jeffs serves as Vice Chairman and
a member of the Executive Committee of the Detroit Symphony
Orchestra, Inc. He is a Director of the Detroit Institute of
Arts. Mr. Jeffs is a member of the Visiting Committee of the
 University of Michigan, School of Business Administration.

Bill M. Thompson, 67, Director since 1996, Term expires in
2001:



Mr. Thompson serves on the Board of Directors of The
University of Texas College of Engineering Foundation Advisory
Council. He is a past member of the Board of Directors of the
American Petroleum Institute, The National Association of
Manufacturers, and The Chemical Manufacturers Association.

Stephen E. Ewing, 56, Director since 1988, Term expires in
2002:



Mr. Ewing is the Chairman of the Detroit Economic Growth
Corporation, the Natural Gas Vehicle Coalition and Oakwood
Healthcare, Inc. and Vice Chairman of United Way Community
Services. He is past Chairman of the 1997 United Way Community
Services Torch Drive, Greater Detroit Area Health Council,
Metropolitan Affairs Corporation and the Midwest Gas Association.
 Mr. Ewing is a board member of the Michigan Jobs
Commission, Detroit Renaissance, Michigan Opera Theater,
Institute of Gas Technology, the American Gas Association, the
Skillman Foundation and AAA Michigan. He is also a member of
Leadership Detroit, the NAACP and Boy Scouts of Americas
Detroit Area Council Executive Board.

118



---



##### Table of Contents



Roger Fridholm, 59, Director since 1988, Term expires in 2002:



Mr. Fridholm serves as a Director of The Stroh Companies,
Comerica Bank-Michigan, and MascoTech, Inc.

Helen O. Petrauskas, 55, Director since 1990, Term expires in
2002:



Ms. Petrauskas is a Director of The Sherwin-Williams
Company, and serves on the Boards of the World Environment Center
 and the Environmental Law Institute. She is also on the Advisory
 Boards of the Center for Risk Analysis, Harvard School of Public
 Health, and Resources for the Future in Washington, D.C.

Executive Officers of MCN

Alfred R. Glancy III, 62, Chairman and Chief Executive
Officer:



Stephen E. Ewing, 56, President and Chief Operating Officer:



Howard L. Dow III, 44, Executive Vice President, Chief
Financial Officer and Treasurer:



Daniel L. Schiffer, 56, Senior Vice President, General Counsel
 and Secretary:



119



---



##### Table of Contents








ITEM 11. EXECUTIVE COMPENSATION


Directors Compensation

As of April 1, 1997, non-officer directors receive an annual
 fee of $30,000. Additionally, each year non-officer directors
receive performance shares worth approximately $30,000,
calculated at the beginning of the fiscal year and rounded to the
 nearest 100 shares. Each performance share is equivalent to one
share of MCN common stock. Non-officer directors are permitted to
 defer all or a portion of their cash retainer fee in performance
 shares. The performance shares will be credited to deferral
accounts established for each non-officer director. The value of
the performance shares held in each non-officer directors
account will increase/decrease as the value of the underlying MCN
 common stock increases/decreases and the account will be
credited with dividend equivalents equal to one-half of the
common stock dividend rate. Upon the non-officer directors
death or retirement, the value of the performance shares will be
paid out in shares of MCN common stock over a period of
one-to-fifteen years as elected by the non-officer director.
Based on the current elections of the non-officer directors, 100%
 of their compensation will be in the form of performance shares,
 further aligning the interests of each non-officer director and
shareholders by tying compensation to the value of MCN common
stock.

Executives Compensation

The following table sets forth the aggregate compensation paid or
 awarded for performance from 1997 through 1999 to the
Companys chief executive officer and its four most highly
compensated executive officers in 1999 (collectively, the
Named Executive Officers).

Summary Compensation Table

|                            |                           |      |      |                        |  |                        |         |            |  |            |         |         |  |           |         |        |  |  |   |           |  |  |   |         |  |  |           |           | 
|--------------------------- | ------------------------- | ---- | ---- | ---------------------- |  | ---------------------- | ------- | ---------- |  | ---------- | ------- | ------- |  | --------- | ------- | ------ |  |  | - | --------- |  |  | - | ------- |  |  | --------- | --------- | 
|                            |                           |      |      |                        |  |                        |         |            |  |           
|                            |                           |      |      |                        |  | Long-Term Compensation
|                            |                           |      |      | Annual Compensation(1) |  |                       
|                            |                           |      |      |                        |  | Restricted             |         | Securities |  |           
|                            |                           |      |      |                        |  | Other Annual           |         | Stock      |  | Underlying |         | LTIP   
|                            |                           |      |      |                        |  | Compensation           |         | Award      |  | Options    |         | Payout 
|Name and Principal Position |                           | Year |      | Salary($)              |  | Bonus($)(2)            |         | ($)(3)     |  | ($)(4)     |         | (#)(5)  |  | ($)(1)(6)
|                            |                           |      |      |                        |  |                        |         |            |  |            |         |         |  |          
|Alfred R. Glancy III        |                           |      | 1999 |                        |  |                        | 675,000 |            |  |            | 994,781 |         |  |           |        |        |  |  |  |           |  |  |  |         |  |  | 2,339,578 |          
|                            | Chairman & Chief          |      |      | 1998                   |  |                        |         | 667,800    |  |            |         | 0       |  |           |         |       |  |  |   |          |  |  |   | 100,000 |  |  |           | 0         | 
|                            | Executive Officer         |      |      | 1997                   |  |                        |         | 620,833    |  |            |         | 500,000 |  |           |         |       |  |  |   |          |  |  |   |        |  |  |           | 2,382,016 | 
|                           
|                           
|                           
|                           
|                           
|Stephen E. Ewing            |                           |      | 1999 |                        |  |                        | 445,192 |            |  |            | 550,000 |         |  |           |        |        |  |  |  |           |  |  |  |         |  |  | 939,516   |          
|                            | President & Chief         |      |      | 1998                   |  |                        |         | 412,500    |  |            |         | 450,000 |  |           |         |       |  |  |   |          |  |  |   | 48,300  |  |  |           | 0         | 
|                            | Operating Officer         |      |      | 1997                   |  |                        |         | 356,667    |  |            |         | 240,000 |  |           |         |       |  |  |   |          |  |  |   |        |  |  |           | 1,339,884 | 
|                           
|                           
|                           
|                           
|                           
|Joseph T. Williams (8)      |                           |      | 1999 |                        |  |                        | 233,333 |            |  |            | 645,000 |         |  |           | 307,068 |        |  |  |  |           |  |  |  |         |  |  | 246,239   |          
|                            | Former President &        |      |      | 1998                   |  |                        |         | 352,000    |  |            |         | 0       |  |           |         | 68,509 |  |  |   |          |  |  |   |        |  |  |           |          | 
|                            | Chief Executive Officer,  |      |      | 1997                   |  |                        |         | 128,225    |  |            |         | 385,000 |  |           |         |       |  |  |   | 1,156,594 |  |  |   |        |  |  |           |          | 
|                            | MCNEE                     |      |      |                        |  |                        |         |            |  |            |         |         |  |           |         |        |  |  |   |           |  |  |   |         |  |  |           |           | 
|                           
|                           
|                           
|                           
|                           
|Howard L. Dow III           |                           |      | 1999 |                        |  |                        | 266,346 |            |  |            | 388,364 |         |  |           |        |        |  |  |  |           |  |  |  |         |  |  | 254,836   |          
|                            | Executive Vice President, |      |      | 1998                   |  |                        |         | 211,539    |  |            |         | 180,000 |  |           |         |       |  |  |   |          |  |  |   | 14,000  |  |  |           | 0         | 
|                            | Chief Financial Officer & |      |      | 1997                   |  |                        |         | 205,000    |  |            |         | 98,200  |  |           |         |       |  |  |   |          |  |  |   |        |  |  |           | 558,285   | 
|                            | Treasurer                 |      |      |                        |  |                        |         |            |  |            |         |         |  |           |         |        |  |  |   |           |  |  |   |         |  |  |           |           | 
|                           
|                           
|                           
|                           
|                           
|Daniel L. Schiffer          |                           |      | 1999 |                        |  |                        | 248,077 |            |  |            | 235,800 |         |  |           |        |        |  |  |  |           |  |  |  |         |  |  | 315,628   |          
|                            | Senior Vice President,    |      |      | 1998                   |  |                        |         | 240,000    |  |            |         | 0       |  |           |         |       |  |  |   |          |  |  |   | 12,950  |  |  |           | 0         | 
|                            | General Counsel &         |      |      | 1997                   |  |                        |         | 237,500    |  |            |         | 150,000 |  |           |         |       |  |  |   |          |  |  |   |        |  |  |           | 744,380   | 
|                            | Secretary                 |      |      |                        |  |                        |         |            |  |            |         |         |  |           |         |        |  |  |   |           |  |  |   |         |  |  |           |           | 

[Additional columns below]

[Continued from above table, first column(s) repeated]

|                            |                           |              |           |        | 
|--------------------------- | ------------------------- | ------------ | --------- | ------ | 
|                            |                           | All Other   
|                            |                           | Compensation
|Name and Principal Position |                           | ($)(7)      
|                            |                           |             
|Alfred R. Glancy III        |                           |              | 3,646,947 |       
|                            | Chairman & Chief          |              |           | 66,326 | 
|                            | Executive Officer         |              |           | 61,110 | 
|                           
|                           
|                           
|                           
|Stephen E. Ewing            |                           |              | 41,928    |       
|                            | President & Chief         |              |           | 39,229 | 
|                            | Operating Officer         |              |           | 33,818 | 
|                           
|                           
|                           
|                           
|Joseph T. Williams (8)      |                           |              | 202,756   |       
|                            | Former President &        |              |           | 27,835 | 
|                            | Chief Executive Officer,  |              |           |       | 
|                            | MCNEE                     |              |           |        | 
|                           
|                           
|                           
|                           
|Howard L. Dow III           |                           |              | 20,894    |       
|                            | Executive Vice President, |              |           | 13,312 | 
|                            | Chief Financial Officer & |              |           | 11,675 | 
|                            | Treasurer                 |              |           |        | 
|                           
|                           
|                           
|                           
|Daniel L. Schiffer          |                           |              | 20,542    |       
|                            | Senior Vice President,    |              |           | 19,496 | 
|                            | General Counsel &         |              |           | 18,673 | 
|                            | Secretary                 |              |           |        | 

120



---



##### Table of Contents



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes amounts received or deferred.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(2) | Amounts under the MCN Energy Group Inc. Annual
	Performance Plan are shown for the year upon which performance is
	 measured. They are generally paid in February or March of the
	subsequent year. Messrs. Ewing and Dow earned bonuses for
	1998 based upon MichCons performance.
	Mr. Williams 1997 bonus includes a signing bonus of
	$250,000. Mr. Williams 1999 bonus was paid on the
	second anniversary of his date of hire in shares of MCN common
	stock pursuant to the terms of his employment agreement.
	Mr. Dows bonus for 1999 includes an additional
	$100,000 for his efforts in negotiating the merger with DTE.
|(3) | Amount represents payment by the Company to cover
	taxes on the vesting of restricted stock.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|(4) | The Companys current use of restricted stock
	 is limited to special situations, such as the retention of newly
	 hired executives. Mr. Williams was granted 36,500 shares
	upon his hiring. The shares vested as indicated in the table
	below.                                                                                                                                                                                                                                                                                                                                                                                      

|                 |  |        |        | 
|---------------- |  | ------ | ------ | 
|Date             |  | Shares
|                 |  |       
|7/28/98          |  |        | 2,100  | 
|                
|                
|                
|                
|7/28/99          |  |        | 2,100  | 
|                
|                
|                
|                
|Upon Termination |  |        | 32,300 | 

|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(5) | Stock options are granted in the February
	subsequent to the fiscal year indicated in the table.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|(6) | Amounts shown in this column represent the dollar
	value of final payouts of performance shares awarded pursuant to
	the Performance Share Plan. The initial number of performance
	shares granted is based on total shareholder return relative to
	the peer group during the previous three-year period. The initial
	 grants are adjusted upward or downward based on total
	shareholder return relative to the peer group for the subsequent
	three-year period. Pursuant to the change of control provisions
	in the Performance Share Plan, the 1999 payout was for all three
	of the outstanding tranches.
|(7) | Amounts shown in this column represent the
	Companys contributions to defined contribution plans and
	its payment of life insurance premiums. In addition,
	Mr. Glancys amount for 1999 includes a change of
	control payment of $3,519,781 due to his retirement upon the
	completion of the merger. Mr. Williams amount for 1999
	 includes severance payments of $166,667 pursuant to the terms of
	 his termination of employment agreement.                                                                                                                                                              
|(8) | Mr. Williams was hired on July 28, 1997
	and his employment ended with the company on July 31, 1999.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

121



---



##### Table of Contents



Long-Term Compensation

Beginning with the 1998 performance year, the Company determined
that 50% of its long-term incentive awards should be in the form
of stock options. The options were scheduled to vest ratably over
 three years following the date of grant. Pursuant to the change
of control provisions in the MCN Stock Incentive Plan, the
options vested on December 20, 1999.

Options Exercised

|                     |  |             |   |                   |  |                         |   |                      |  |  |         |  |  |  |         | 
|-------------------- |  | ----------- | - | ----------------- |  | ----------------------- | - | -------------------- |  |  | ------- |  |  |  | ------- | 
|                     |  |             |   |                   |  | Number Of Securities    |   | Value Of Unexercised
|                     |  | Shares      |   |                   |  | Underlying Unexercised  |   | In-The-Money Options
|                     |  | Acquired On |   |                   |  | Options At Fiscal       |   | At Fiscal Year-End  
|Name                 |  | Exercise(#) |   | Value Realized($) |  | Year-End Exercisable(#) |   | Exercisable($)(1)   
|                     |  |             |   |                   |  |                         |   |                     
|Alfred R. Glancy III |  |             |  |                   |  |                         |  |                      |  |  | 100,000 |  |  |  | 837,500 | 
|                    
|                    
|                    
|                    
|Stephen E. Ewing     |  |             |  |                   |  |                         |  |                      |  |  | 48,300  |  |  |  | 404,513 | 
|                    
|                    
|                    
|                    
|Joseph T. Williams   |  |             |  |                   |  |                         |  |                      |  |  |        |  |  |  |        | 
|                    
|                    
|                    
|                    
|Howard L. Dow III    |  |             |  |                   |  |                         |  |                      |  |  | 14,000  |  |  |  | 117,250 | 
|                    
|                    
|                    
|                    
|Daniel L. Schiffer   |  |             |  |                   |  |                         |  |                      |  |  | 12,950  |  |  |  | 108,456 | 



|    |                                                                                                                                                                                                                                                                                                                                          
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Pursuant to the change of control provisions of
	the MCN Stock Incentive Plan, participants were permitted to
	cash-out their stock options based upon a price of $25.625, the
	highest price of MCN common stock during the 60 day period
	immediately preceding shareholder approval of the merger, less
	the exercise price of $17.25.

Change Of Control Employment Agreements

MCN has entered into Change of Control Employment Agreements with
 its Named Executive Officers and certain other officers of MCN
and its two principal subsidiaries. Change of control is defined
in the agreements as any of the following: (1) the
acquisition of beneficial ownership of 20% or more of the
outstanding voting securities of the Company, (2) the
appointment or election of new directors to the Companys
Board which causes the existing directors to no longer constitute
 at least a majority of the Companys Board,
(3) shareholder approval of a reorganization, merger or
consolidation in which the beneficial owners of the outstanding
voting securities will have a beneficial interest of less than
60% of the common stock or outstanding voting securities of the
corporation resulting from such reorganization, merger or
consolidation, or (4) a complete liquidation or dissolution
of the Company. The agreements generally have a term of three
years beginning with the later of the change of control or the
consummation of a change of control transaction. The agreements
obligate the officer to continue to serve MCN in the
officers then current capacity, require MCN to compensate
the officer in an amount at least equal to the officers
base salary plus the average annual bonus paid to the officer
during the preceding three years and provide for the vesting of
various unfunded benefits. These unfunded benefits include the
Supplemental Retirement Plan discussed on page 124, the
Supplemental Death Benefit and Retirement Income Plan discussed
on page 124 and the Supplemental Savings Plan, which permits
 certain key executives to defer income and be credited with
matching contributions to the extent that would otherwise be
permitted under the Savings Plan but for limitations imposed by
Federal tax law on tax-qualified savings plans. The agreements
also provide for the grossed-up payment of any Federal excise
taxes due from the executive as a result of any payments received
 under the agreement and provide three years of continued
participation in MCNs benefit and retirement programs.
MCNs obligations to the officer, including the obligation
to pay base salary and any bonuses, can only be extinguished if
the officers employment is terminated by MCN for good
 cause or by the officer without good reason
both as defined in the agreements, or by death or disability.

122



---



##### Table of Contents



On December 20, 1999, more than 74% of MCNs
shareholders approved the Companys proposed merger with DTE
 Energy Company, which resulted in a change of control.
Messrs. Ewing and Dow and certain other officers of MCN have
 negotiated new employment agreements with DTE in which they have
 given up certain of their rights under their Change of Control
Employment Agreements. Mr. Glancy and certain other officers
 of MCN exercised their rights under their Change of Control
Employment Agreements. They received all or a portion of their
change of control payments in December 1999, with any
remainder payable upon the closing of the merger with DTE. DTE
has agreed to reimburse MCN for the change of control payments if
 the merger is not completed.

Special Retention Agreement

As part of his offer of employment from MCNEE, Mr. Williams
received a signing bonus of $250,000 and 36,500 shares of
restricted stock, which vested as set forth in footnote 4 to the
Summary Compensation Table. In addition, the agreement provides a
 guaranteed level of compensation for the second year of
employment which resulted in an additional grant of stock equal
to $645,000 in July 1999. Other compensation and benefits
provided to Mr. Williams include: (1) a three-year
severance package and (2) retiree health care based on 15
years of service.

Retirement Plans

Pension Plan Table

|                                                                  |  |       |         |       |  |       |         |       |  |       |         |       |  |   |         |  |  |   |         |  |  |   |         | 
|----------------------------------------------------------------- |  | ----- | ------- | ----- |  | ----- | ------- | ----- |  | ----- | ------- | ----- |  | - | ------- |  |  | - | ------- |  |  | - | ------- | 
|                                                                 
|Annual Retirement Benefit At Age 65 For Years Of Credited Service
|                                                                 
|Final Average                                                     |  | 20    |         | 25    |  | 30    |         | 35    |  | 40    |         | 45   
|Annual Earnings                                                   |  | Years |         | Years |  | Years |         | Years |  | Years |         | Years
|                                                                  |  |       |         |       |  |       |         |       |  |       |         |      
|$200,000                                                          |  | $     | 73,000  |       |  | $     | 91,300  |       |  | $     | 109,500 |       |  | $ | 127,800 |  |  | $ | 141,000 |  |  | $ | 154,300 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|250,000                                                           |  |       | 91,300  |       |  |       | 114,100 |       |  |       | 137,000 |       |  |   | 159,800 |  |  |   | 176,400 |  |  |   | 193,000 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|300,000                                                           |  |       | 109,600 |       |  |       | 137,000 |       |  |       | 164,400 |       |  |   | 191,800 |  |  |   | 211,700 |  |  |   | 231,600 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|350,000                                                           |  |       | 127,900 |       |  |       | 159,900 |       |  |       | 191,900 |       |  |   | 223,800 |  |  |   | 247,100 |  |  |   | 270,300 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|400,000                                                           |  |       | 146,200 |       |  |       | 182,800 |       |  |       | 219,300 |       |  |   | 255,900 |  |  |   | 282,400 |  |  |   | 309,000 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|450,000                                                           |  |       | 164,500 |       |  |       | 205,600 |       |  |       | 246,800 |       |  |   | 287,900 |  |  |   | 317,800 |  |  |   | 347,700 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|500,000                                                           |  |       | 182,800 |       |  |       | 228,500 |       |  |       | 274,200 |       |  |   | 319,900 |  |  |   | 353,100 |  |  |   | 386,300 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|550,000                                                           |  |       | 241,800 |       |  |       | 276,100 |       |  |       | 301,600 |       |  |   | 351,900 |  |  |   | 388,500 |  |  |   | 425,000 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|600,000                                                           |  |       | 263,800 |       |  |       | 301,300 |       |  |       | 329,100 |       |  |   | 383,900 |  |  |   | 423,800 |  |  |   | 463,700 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|650,000                                                           |  |       | 285,800 |       |  |       | 326,400 |       |  |       | 356,500 |       |  |   | 415,900 |  |  |   | 459,100 |  |  |   | 502,400 | 
|                                                                 
|                                                                 
|                                                                 
|                                                                 
|700,000                                                           |  |       | 307,800 |       |  |       | 351,500 |       |  |       | 384,000 |       |  |   | 447,900 |  |  |   | 494,500 |  |  |   | 541,000 | 

Salaried employees of MCN and certain of its subsidiaries (the
Participating Companies) may participate in a
noncontributory, defined benefit retirement plan (the
Retirement Plan), under which benefits have been
based upon the final average salary. Specifically, the monthly
pension at normal retirement (age 65) is calculated using a
formula providing a single life monthly benefit equal to
(1) 1.33% of final average monthly earnings multiplied by
the number of total Years of Credited Service (as defined in the
plan) with the Participating Companies; plus (2) 0.5% of
final average monthly earnings that exceed a 35-year average
Social Security wage base multiplied by the number of Years of
Credited Service up to 35 years. Early retirement benefits
(at a reduced benefit if such retirement is before the
participant attains age 62) are permitted under the plan,
(1) on or after the date a participant attains age 55, if
the participants age plus Years of Credited Service equals
or exceeds 70, or (2) when the participant has attained 30
Years of Credited Service. An employees final average
monthly earnings is defined as his or her highest average monthly
 earnings for a consecutive 60-month period during the
participants last 15 years of employment. Average
monthly earnings are calculated based on an individuals
base salary only. An employee is not vested

123



---



##### Table of Contents





The previous table illustrates the total estimated annual normal
retirement pension benefits including the Supplemental Retirement
 Plan amounts (discussed below), if applicable, that will be
payable upon normal retirement at age 65 to participants for the
specified remuneration and Years of Credited Service
classifications. Retirement benefits are not subject to any
deduction for social security or other offset amounts. The table
does not reflect any reductions in retirement benefits that would
 result from the selection of one of various available
survivorship options or the election to retire prior to age 62.
Benefit amounts are computed on a straight life annuity basis.

As of December 31, 1999, the Years of Service (rounded to
the nearest whole year) for the Named Executive Officers
participating in the final average salary plan are as follows:
Mr. Ewing, 28 years, Mr. Dow, 21 years and
Mr. Schiffer, 23 years.

In 1998, the Company adopted a cash balance plan feature within
its defined benefit plan to better attract and retain employees.
The cash balance plan is the defined benefit plan for all new
hires at MCN and MCNEE and was offered as a one-time option to
all current employees of MCN and MCNEE. For employees electing to
 switch from the final average salary to the cash balance plan, a
 retirement annuity as of January 1, 1998 was calculated
under the traditional defined benefit plan formula
described above and present-valued using a 6.11% interest rate,
the average interest rate on 30-year Treasury Bills for
November 1997. This amount represented the opening account
balance under the cash balance feature. Under the cash balance
plan, at the beginning of each year, each participants
account is credited with 8% of the individuals salary and
bonus plus an additional 5% of such compensation over the Social
Security wage base. In addition, each participants account
is credited with interest based on the 30-year Treasury Bill rate
 as of November of the prior year. All vested participants in the
 cash balance plan are entitled to receive a lump sum payment in
lieu of monthly pension annuities. Mr. Glancy and 248 other
incumbent employees out of an eligible group of 330 opted to
participate in the cash balance plan. Had Mr. Glancy retired
 effective January 1, 2000, he could have elected to receive
 an immediate annual annuity under the cash balance plan of
$461,000.

The Company also maintains the Supplemental Retirement Plan,
which provides for the payment of benefits that would otherwise
be payable under the Retirement Plan but for limitations imposed
by Federal tax law on benefits paid by qualified plans.

The Companys Named Executive Officers and certain other
officers of the Participating Companies currently participate in
a Supplemental Death Benefit and Retirement Income Plan. Under
this plan, the pre-retirement death benefits payable to an
employees surviving spouse are 50% of the employees
final salary until such time as the employee would have reached
age 65. Thereafter, payments are 20% of salary until the employee
 would have reached age 75. At retirement an employee may elect
to receive (1) annual supplemental retirement income equal
to 20% of the employees final annual salary payable for a
period of 10 years after age 62; or (2) other available
 post retirement benefits that are actuarially equivalent to the
10-year payment option.

Compensation Committee Interlocks and Insider
Participation

Mr. Thomas H. Jeffs II, Mr. Roger Fridholm,
Mr. Howard Sims and Mr. Bill M. Thompson serve on the
Compensation Committee of MCN. There are no Compensation
Committee interlocks, nor do any officer directors participate on
 this committee.

124



---



##### Table of Contents








|         |                                                
|-------- | -----------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS

AND MANAGEMENT


The following table includes MCN Common Stock and stock-based
holdings, as of February 29, 2000, of the Companys
Named Executive Officers and its directors.

Common Stock And Total Stock-Based Holdings

|                                 |  |              |         |         |  |                |    |       |  |  |         |  |  |  |           | 
|-------------------------------- |  | ------------ | ------- | ------- |  | -------------- | -- | ----- |  |  | ------- |  |  |  | --------- | 
|                                 |  |              |         |         |  |               
|                                 |  | Common Stock |         |         |  |               
|                                 |  | Ownership    |         |         |  |               
|                                 |  |              |         | Stock   |  |               
|Name                             |  | Amount(1)    |         | Percent |  | Equivalents(2) |    | Total
|                                 |  |              |         |         |  |                |    |      
|Alfred R. Glancy III             |  |              | 443,303 | (3)     |  |                | .5 | %     |  |  | 164,336 |  |  |  | 607,639   | 
|                                
|                                
|                                
|                                
|Stephen E. Ewing                 |  |              | 36,113  | (3)     |  |                | *  |       |  |  | 110,605 |  |  |  | 146,718   | 
|                                
|                                
|                                
|                                
|Joseph T. Williams               |  |              | 56,516  | (3)     |  |                | .1 | %     |  |  |        |  |  |  | 56,516    | 
|                                
|                                
|                                
|                                
|Daniel L. Schiffer               |  |              | 49,359  | (3)     |  |                | .1 | %     |  |  | 13,000  |  |  |  | 62,359    | 
|                                
|                                
|                                
|                                
|Howard L. Dow III                |  |              | 34,188  | (3)     |  |                | *  |       |  |  |        |  |  |  | 34,188    | 
|                                
|                                
|                                
|                                
|James G. Berges                  |  |              | 100     |         |  |                | *  |       |  |  | 5,623   |  |  |  | 5,723     | 
|                                
|                                
|                                
|                                
|Roger Fridholm                   |  |              | 10,100  | (4)     |  |                | *  |       |  |  | 8,835   |  |  |  | 18,935    | 
|                                
|                                
|                                
|                                
|Frank M. Hennessey               |  |              | 11,207  |         |  |                | *  |       |  |  | 12,947  |  |  |  | 24,154    | 
|                                
|                                
|                                
|                                
|Thomas H. Jeffs II               |  |              | 5,000   |         |  |                | *  |       |  |  | 11,676  |  |  |  | 16,676    | 
|                                
|                                
|                                
|                                
|Helen O. Petrauskas              |  |              | 3,208   |         |  |                | *  |       |  |  | 8,550   |  |  |  | 11,758    | 
|                                
|                                
|                                
|                                
|Howard F. Sims                   |  |              | 3,212   |         |  |                | *  |       |  |  | 11,487  |  |  |  | 14,699    | 
|                                
|                                
|                                
|                                
|Bill M. Thompson                 |  |              | 3,439   |         |  |                | *  |       |  |  | 8,524   |  |  |  | 11,963    | 
|Directors and executive officers |  |              |         |         |  |                |    |       |  |  |         |  |  |  |           | 
|                                
|                                
|                                
|                                
|As a group                       |  |              | 655,745 |         |  |                | .8 | %     |  |  | 355,583 |  |  |  | 1,011,328 | 

|    |                                                                                                                                                                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|*   | Less than 0.1%                                                                                                                                                                                                                                                                                                                                            
|(1) | This column lists voting securities, including
	shares of restricted stock in which the beneficial owners have
	voting power but do not have investment power until the shares
	vest. In many instances, voting power and investment power are
	shared with another as joint tenants.                                                                     
|(2) | This column includes the non-voting common stock
	equivalents, such as performance shares granted and deferred
	under the Stock Incentive Plan, deferred stock units under the
	Mandatory Deferred Compensation Plan, share equivalents under the
	 Supplemental Savings Plan, and performance shares under the
	Nonemployee Directors Compensation Plan.
|(3) | Includes shares held in the MCN Energy Group
	Savings and Stock Ownership Plan (the Savings Plan).
	The beneficial owners of the shares have sole voting power on all
	 shares. Beneficial owners have investment power on all shares
	except those purchased by MCN and held as restricted under
	provisions of the Savings Plan.                      
|(4) | Includes 1,900 shares held in the St. Clair
	Charitable Trust, of which Roger Fridholm is a Trustee.
	Mr. Fridholm has shared voting and investment power on these
	 shares.                                                                                                                                                                              






ITEM 13.  CERTAIN RELATIONSHIPS AND
RELATED TRANSACTIONS


Indebtedness of Management

In order to encourage executives to maintain their holdings in
shares purchased under a stock option plan, which was replaced by
 the MCN Stock Incentive Plan in May 1989, the Company
provided loans at an interest rate in accordance with IRS
guidelines based on the market yield of U.S. short-term
marketable securities. Pursuant to this provision,
Mr. Glancy initiated a loan in 1992 at an interest rate of
4.43%, which was renewed in 1995 and again in 1998 at the then
current interest

125



---



##### Table of Contents





126



---



##### Table of Contents








PART IV







|         |                                            
|-------- | -------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND

REPORTS ON FORM 8-K


(A)  List of documents filed as part of
the report:



|   |                                                                                                                                                                                   
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | For a list of financial statements, see the section titled
	Financial Statements and Supplementary Data on
	page 59 in Part II, Item  8 of this report.                         
|  
|2. | The Financial Statement Schedules for each of the three years in
	the period ended December 31, 1999, unless otherwise noted,
	are included herein in response to Part II, Item 8:

Schedule

II  Valuation and Qualifying Accounts

Schedules other than those referred to above are omitted as not
applicable or not required, or the required information is shown
in the financial statements or notes thereto.

127



---



##### Table of Contents



|         |                                            
|-------- | -------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND

REPORTS ON FORM 8-K(CONTINUED)


3.  Exhibits, Including Those Incorporated by Reference.

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|------- | -- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 2- | 1           |  | Agreement and Plan of Merger, dated as of October 4, 1999,
	by and among MCN Energy Group Inc., DTE Energy Company and DTE
	Enterprises, Inc. (Exhibit 2 to October 4, 1999
	Form  8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 3- | 1           |  | Articles of Incorporation of MCN Energy Group Inc. (Exhibit 
	 3-1 to March 31, 1998 Form 10-Q).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3- | 2           |  | By-Laws of MCN Energy Group Inc., as amended (Exhibit 3-2 to
	 MCNs 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 3- | 3           |  | Certificate of Limited Partnership of MCN Michigan Limited
	Partnership (Exhibit 4-6 to Registration Statement No. 
	 33-55665).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3- | 4           |  | Certificate of Trust of MCN Financing I (Exhibit 4-11
	to Registration Statement No. 333-01521).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|        | 3- | 5           |  | Certificate of Trust of MCN Financing III (Exhibit 4-16
	 to Registration Statement No. 333-21175).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|        | 4- | 1           |  | Rights Plan (Exhibit 28-1 to December 20, 1989
	Form 8-K, Exhibit 4 to July 23, 1997
	Form 8-K, and Exhibits 4-2 and 4-4 to October 4,
	1999 Form 8-A/ A).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|        | 4- | 2           |  | Senior Debt Securities Indenture between MCN Energy Group Inc.
	and NBD Bank, N.A., as Trustee, dated September 1, 1994
	(Exhibit 4-4 to Registration Statement No. 33-55665);
	First Supplemental Indenture, dated June 4, 1997
	(Exhibit  4-2 to MCNs 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        | 4- | 3           |  | Subordinated Debt Securities Indenture between MCN Energy Group
	Inc. and NBD Bank, N.A., as Trustee, dated September  1,
	1994 (Exhibit 4-5 to Registration Statement No. 
	33-55665); First Supplemental Indenture, dated April 17,
	1996 (Exhibit 4-18 to Amendment No. 2 to Registration
	Statement No. 333-01521); Second Supplemental Indenture,
	dated July 24, 1996 (Exhibit 5-2 to July 24, 1996
	Form  8-K); Third Supplemental Indenture, dated
	March 19, 1997 (Exhibit 5-3 to March 19, 1997
	Form 8-K; and Fourth Supplemental Indenture dated
	November 18, 1998 (Exhibit  5-3 to November 13,
	1998 Form 8-K).                                                                                                                                                                                                                                                                     
|        | 4- | 4           |  | MichCons Indenture of Mortgage and Deed of Trust dated
	March 1, 1944 (Exhibit 7-D to Registration Statement
	No.  2-5252); Twenty-ninth Supplemental Indenture, dated
	July  15, 1989 (Exhibit 4-1 to July 27, 1989
	Form 8-K); Thirtieth Supplemental Indenture, dated
	September 1, 1991 (Exhibit 4-1 to September 27,
	1991 Form 8-K); Thirty-first Supplemental Indenture, dated
	December 15, 1991 (Exhibit 4-1 to February 28,
	1992 Form 8-K); Thirty-second Supplemental Indenture, dated
	January 5, 1993 (Exhibit 4-1 to 1992 Form 10-K);
	Thirty-third Supplemental Indenture, dated May 1, 1996
	(Exhibit 4-2 to Registration Statement No. 33-59093);
	Thirty-fourth Supplemental Indenture, dated November 1, 1996
	 (Exhibit 4-2 to Registration Statement No. 333-16285); and
	Thirty-fifth Supplemental Indenture, dated June 18, 1998
	(Exhibit 4-2 to June 18, 1998 Form 8-K).
|        | 4- | 5           |  | Senior Debt Securities Indenture between Michigan Consolidated
	Gas Company and Citibank, N.A., as Trustee, dated June 1,
	1998 (Exhibit 4-1 to Amendment No. 2 to Registration
	Statement No. 333-56333); First Supplemental Indenture dated
	 June 18, 1998 (Exhibit 4-1 to June 18, 1998
	Form 8-K); and Second Supplemental Indenture dated
	June 9, 1999 (Exhibit 4-1 to June 4, 1999
	Form 8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|        | 4- | 6           |  | Debt Securities Indenture between MCN Investment Corp. (currently
	 doing business as MCN Energy Enterprises Inc.) and NBD Bank as
	Trustee, dated September 1, 1995 (Exhibit  4-1 to
	Registration Statement No. 33-63311).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

128



---



##### Table of Contents



|         |                                            
|-------- | -------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND

REPORTS ON FORM 8-K(CONTINUED)


|        |     |             |  |                                                                                                                                                                                                            
|------- | --- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|No.     |     | Description
|        |     |            
|        | 4-  | 7           |  | MCN hereby agrees to furnish to the SEC, upon request, a copy of
	any instruments defining the rights of holders of long-term debt
	issued by MCN or its subsidiaries.                                     
|        | 4-  | 8           |  | Form of Guarantee Agreement with Respect to Preferred Securities
	of MCN Michigan Limited Partnership (Exhibit 4-8 to
	Registration Statement No. 33-55665).                                               
|        | 4-  | 9           |  | Amended and Restated Limited Partnership Agreement of MCN
	Michigan Limited Partnership (Exhibit 4-8 to Registration
	Statement No. 33-55665) Partnership (Exhibit 4-1 to
	October 26, 1994 Form 8-K).     
|        | 4-  | 10          |  | Form of MCN Energy Group Inc. Series A Subordinated
	Deferrable Interest Debt Security for $100,000,000 (Exhibit 
	 4-6 to October 26, 1994 Form 8-K).                                                     
|        | 4-  | 11          |  | Form of MCN Energy Group Inc. Series A Subordinated
	Deferrable Interest Debt Security for $1,100,000 (Exhibit 
	4-7 to October 26, 1994 Form 8-K).                                                        
|        | 4-  | 12          |  | Amended and Restated Declaration of Trust of MCN Financing I,
	dated as of July 24, 1996 (Exhibit 5-1 to July 24,
	 1996 Form 8-K).                                                                        
|        | 4-  | 13          |  | Preferred Securities Guarantee Agreement, dated as of July 
	26, 1996, between MCN and Wilmington Trust Company (Exhibit 
	 5-4 to July 24, 1996 Form 8-K).                                                
|        | 4-  | 14          |  | Form of Preferred Security of MCN Financing I (Annex I
	to the Amended and Restated Declaration of Trust of MCN
	Financing I included as Exhibit 4-12 hereto).                                             
|        | 4-  | 15          |  | Purchase Contract Agreement dated March 25, 1997 between MCN
	 and The First National Bank of Chicago, as Purchase Contract
	Agent (Exhibit 5-5 to March 19, 1997 Form 8-K).                               
|        | 4-  | 16          |  | Pledge Agreement dated March 25, 1997 among MCN, Chase
	Manhattan Bank, as Collateral Agent, and The First National Bank
	of Chicago, as Purchase Contract Agent (Exhibit 5-6 to
	March 19, 1997 Form 8-K).
|        | 4-  | 17          |  | Form of FELINE PRIDES Certificate (Exhibit A to the Purchase
	 Contract Agreement included as Exhibit 4-15 hereto).                                                                                        
|        | 4-  | 18          |  | Amended and Restated Declaration of Trust of MCN Financing III,
	dated as of March 19, 1997 (Exhibit 5-2 to
	March 19, 1997 Form 8-K).                                                                     
|        | 4-  | 19          |  | Preferred Securities Guarantee Agreement, dated as of March 
	 19, 1997, between MCN and Wilmington Trust Company
	(Exhibit  5-4 to March 19, 1997 Form 8-K).                                              
|        | 4-  | 20          |  | Form of Preferred Security of MCN Financing III
	(Annex I to the Amended and Restated Declaration of Trust of
	 MCN Financing III included as Exhibit 4-18 hereto).                                        
|        | 4-  | 21          |  | Amended and Restated Declaration of Trust of MCN Financing II,
	dated as of November 18, 1998 (Exhibit 5-2 to
	November 13, 1998 Form 8-K).                                                                
|        | 4-  | 22          |  | Preferred Securities Guarantee Agreement, dated as of
	November 18, 1998 (Exhibit 5-4 to November 13,
	1998 Form  8-K).                                                                                    
|        | 4-  | 23          |  | Form of Preferred Security of MCN Financing II (Annex I
	 to the Amended and Restated Declaration of Trust of MCN
	Financing II included as Exhibit 4-21 hereto).                                          
|        | 10- | 1           |  | MCN Stock Option Plan Post-Effective Amendment No. 1
	(Registration Statement No. 33-21930-99).                                                                                                            
|        | 10- | 2           |  | Form of Employment Agreement (Exhibit 99-2 to June 30,
	1997 Form 10-Q).                                                                                                                                   
|        | 10- | 3           |  | MCN Energy Group Inc. Executive Annual Performance Plan, as
	amended (Exhibit 4-3 to MCNs 1998 Form 10-K).                                                                                                

129



---



##### Table of Contents



|         |                                            
|-------- | -------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND

REPORTS ON FORM 8-K(CONTINUED)


|        |     |             |  |                                                                                                                                                                                                                                                                                                                                  
|------- | --- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|No.     |     | Description
|        |     |            
|        | 10- | 4           |  | MCN Energy Group Inc. Stock Incentive Plan as amended.*                                                                                                                                                                                                                                                                          
|        | 10- | 5           |  | MCN Executive Deferred Compensation Plan, as amended.*                                                                                                                                                                                                                                                                           
|        | 10- | 6           |  | MichCon Supplemental Death Benefit and Retirement Income Plan, as
	 amended.*                                                                                                                                                                                                                                                    
|        | 10- | 7           |  | MCN Energy Group Inc. Supplemental Retirement Plan, as amended.*                                                                                                                                                                                                                                                                 
|        | 10- | 8           |  | MCN Energy Group Inc. Mandatory Deferred Compensation Plan, as
	amended.*                                                                                                                                                                                                                                                        
|        | 10- | 9           |  | MCN Energy Group Inc. Supplemental Savings Plan, as amended.*                                                                                                                                                                                                                                                                    
|        | 10- | 10          |  | MCN Energy Group Inc. Nonemployee Directors Compensation
	Plan, as amended (Exhibit 99-1 to June 30, 1997
	Form  10-Q).                                                                                                                                                                                                         
|        | 10- | 11          |  | MCN Energy Group Inc. Long-Term Incentive Performance Share Plan,
	 as amended.*                                                                                                                                                                                                                                                 
|        | 10- | 12          |  | MCN Energy Group Savings and Stock Ownership Plan, as amended
	(Exhibit 10-14 to 1998 Form 10-K).                                                                                                                                                                                                                                
|        | 10- | 13          |  | MichCon Investment and Stock Ownership Plan, as amended
	(Exhibit 10-15 to 1998 Form 10-K).                                                                                                                                                                                                                                      
|        | 10- | 14          |  | Remarketing Agreement, dated as of March 31, 1998, between
	MCN Investment Corporation, MCN Energy Group Inc. and Merrill
	Lynch, Pierce, Fenner & Smith, Incorporated with respect to
	MCN Investment Corporations 6.30% Mandatory Par Put
	Remarketed Securities due April 2, 2011 (Exhibit 10-1
	to March 31, 1998 Form 8-K).
|        | 10- | 15          |  | Remarketing Agreement, dated as of March 31, 1998, between
	MCN Investment Corporation, MCN Energy Group Inc. and Merrill
	Lynch, Pierce, Fenner & Smith Incorporated with respect to
	MCN Investment Corporations 6.35% Mandatory Par Put
	Remarketed Securities due April 2, 2012 (Exhibit 10-2
	to March 31, 1998 Form 8-K). 
|        | 10- | 16          |  | Reset Remarketing Agreement, dated as of June 23, 1998, by
	and between Michigan Consolidated Gas Company and Salomon
	Brothers Inc. (Exhibit 10-1 to June 18, 1998
	Form 8-K).                                                                                                                                                  
|        | 10- | 17          |  | Reset Remarketing Agreement, dated as of June 23, 1998, by
	and between Michigan Consolidated Gas Company and Merrill Lynch
	& Co./ Merrill Lynch, Pierce, Fenner and Smith Incorporated
	(Exhibit 10-2 to June 18, 1998 Form 8-K).                                                                                              
|        | 12- | 1           |  | Computation of Ratio of Earnings to Fixed Charges for MCN Energy
	Group Inc.*                                                                                                                                                                                                                                                    
|        | 12- | 2           |  | Computation of Ratio of Earnings to Fixed Charges for MCN Energy
	Enterprises Inc.*                                                                                                                                                                                                                                              
|        | 21- | 1           |  | List of MCN Subsidiaries (Part I Nature of Business of
	 Claimants and Every Subsidiary Thereof to the
	December  31, 1999 Form U-3A-2).                                                                                                                                                                                       
|        | 23- | 1           |  | Independent Auditors Consent  Deloitte &
	Touche LLP.*                                                                                                                                                                                                                                                                         
|        | 24- | 1           |  | Powers of Attorney.*                                                                                                                                                                                                                                                                                                             
|        | 27- | 1           |  | Financial Data Schedule.*                                                                                                                                                                                                                                                                                                        



|  |                                   
|- | ----------------------------------
|* | Indicates document filed herewith.

References are to MCNs File No. 1-10070 for the MCN
documents incorporated by reference and MichCons File
No. 1-7310 for the MichCon documents incorporated by
reference.

130



---



##### Table of Contents



|         |                                                     
|-------- | ----------------------------------------------------
|ITEM 14. | EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND
	REPORTS

ON FORM 8-K(CONCLUDED)


(B)  Reports on Form 8-K:

MCN filed a report on Form 8-K dated December 20, 1999,
 under Item 5, with respect to the issuance of a press
release. The press release, which was included in Form 8-K,
noted that MCNs shareholders approved the companys
proposed merger with DTE Energy Company.

131



---



##### 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 Annual Report to be signed on its behalf by the undersigned,
 thereunto duly authorized.



| |                      
| | ---------------------
| | MCN ENERGY GROUP INC.
| |                      
| | (Registrant)         



| |     |                        
| | --- | -----------------------
| | By: | /s/ GERARD F. KABZINSKI

| |                              
| | -----------------------------
| |                              
| | Gerard F. Kabzinski          
| | Vice President and Controller
| | March 28, 2000               

Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed by the following persons on
behalf of the registrant and in the capacities and on the date
indicated.

|                                                                |  |                                                                 |  |               
|--------------------------------------------------------------- |  | --------------------------------------------------------------- |  | --------------
|                                                                |  | Title                                                           |  | Date          
|                                                                |  |                                                                 |  |               
|*Alfred R. Glancy III                                           |  | Director, Chairman and Chief Executive Officer                  |  | March 28, 2000
|*Stephen E. Ewing                                               |  | Director, President and Chief Operating Officer                 |  | March 28, 2000
|*Howard L. Dow III                                              |  | Executive Vice President, Chief Financial Officer and Treasurer |  | March 28, 2000
|/s/ GERARD F. KABZINSKIGerard F. Kabzinski                      |  | Vice President and Controller                                   |  | March 28, 2000
|*James G. Berges                                                |  | Director                                                        |  | March 28, 2000
|*Roger Fridholm                                                 |  | Director                                                        |  | March 28, 2000
|*Frank M. Hennessey                                             |  | Director                                                        |  | March 28, 2000
|*Thomas H. Jeffs II                                             |  | Director                                                        |  | March 28, 2000
|*Helen O. Petrauskas                                            |  | Director                                                        |  | March 28, 2000
|*Howard F. Sims                                                 |  | Director                                                        |  | March 28, 2000
|*Bill M. Thompson                                               |  | Director                                                        |  | March 28, 2000
|*By: /s/ GERARD F. KABZINSKIGerard F. KabzinskiAttorney-in-Fact |  |                                                                 |  |               

132



---



##### Table of Contents



Exhibit Index

|        |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|No.     |    | Description
|        |    |            
|        | 2- | 1           |  | Agreement and Plan of Merger, dated as of October 4, 1999,
	by and among MCN Energy Group Inc., DTE Energy Company and DTE
	Enterprises, Inc. (Exhibit 2 to October 4, 1999
	Form  8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|        | 3- | 1           |  | Articles of Incorporation of MCN Energy Group Inc. (Exhibit 
	 3-1 to March 31, 1998 Form 10-Q).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3- | 2           |  | By-Laws of MCN Energy Group Inc., as amended (Exhibit 3-2 to
	 MCNs 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|        | 3- | 3           |  | Certificate of Limited Partnership of MCN Michigan Limited
	Partnership (Exhibit 4-6 to Registration Statement No. 
	 33-55665).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3- | 4           |  | Certificate of Trust of MCN Financing I (Exhibit 4-11
	to Registration Statement No. 333-01521).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        | 3- | 5           |  | Certificate of Trust of MCN Financing III (Exhibit 4-16 to
	Registration Statement No. 333-21175).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|        | 4- | 1           |  | Rights Plan (Exhibit 28-1 to December 20, 1989
	Form 8-K, Exhibit 4 to July 23, 1997
	Form 8-K, and Exhibits 4-2 and 4-4 to October 4,
	1999 Form 8-A/A).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 4- | 2           |  | Senior Debt Securities Indenture between MCN Energy Group Inc.
	and NBD Bank, N.A., as Trustee, dated September 1, 1994
	(Exhibit 4-4 to Registration Statement No. 33-55665);
	First Supplemental Indenture, dated June 4, 1997
	(Exhibit  4-2 to MCNs 1997 Form 10-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|        | 4- | 3           |  | Subordinated Debt Securities Indenture between MCN Energy Group
	Inc. and NBD Bank, N.A., as Trustee, dated September  1,
	1994 (Exhibit 4-5 to Registration Statement No. 
	33-55665); First Supplemental Indenture, dated April 17,
	1996 (Exhibit 4-18 to Amendment No. 2 to Registration
	Statement No. 333-01521); Second Supplemental Indenture,
	dated July 24, 1996 (Exhibit 5-2 to July 24, 1996
	Form  8-K); Third Supplemental Indenture, dated
	March 19, 1997 (Exhibit 5-3 to March 19, 1997
	Form 8-K; and Fourth Supplemental Indenture dated
	November 18, 1998 (Exhibit  5-3 to November 13,
	1998 Form 8-K).                                                                                                                                                                                                                                                                      
|        | 4- | 4           |  | MichCons Indenture of Mortgage and Deed of Trust dated
	March 1, 1944 (Exhibit 7-D to Registration Statement
	No.  2-5252); Twenty-ninth Supplemental Indenture, dated
	July  15, 1989 (Exhibit 4-1 to July 27, 1989
	Form 8-K); Thirtieth Supplemental Indenture, dated
	September 1, 1991 (Exhibit 4-1 to September 27,
	1991 Form 8-K); Thirty-first Supplemental Indenture, dated
	December 15, 1991 (Exhibit 4-1 to February 28,
	1992 Form 8-K); Thirty-second Supplemental Indenture, dated
	January 5, 1993 (Exhibit 4-1 to 1992 Form 10-K);
	Thirty-third Supplemental Indenture, dated May 1, 1996
	(Exhibit 4-2 to Registration Statement No. 33-59093);
	Thirty-fourth Supplemental Indenture, dated November 1, 1996
	 (Exhibit 4-2 to Registration Statement No. 333-16285);
	 and Thirty-fifth Supplemental Indenture, dated June 18,
	1998 (Exhibit 4-2 to June 18, 1998 Form 8-K).
|        | 4- | 5           |  | Senior Debt Securities Indenture between Michigan Consolidated
	Gas Company and Citibank, N.A., as Trustee, dated June 1,
	1998 (Exhibit 4-1 to Amendment No. 2 to Registration
	Statement No. 333-56333); First Supplemental Indenture dated
	 June 18, 1998 (Exhibit 4-1 to June 18, 1998
	Form 8-K); and Second Supplemental Indenture dated
	June 9, 1999 (Exhibit 4-1 to June 4, 1999
	Form 8-K).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|        | 4- | 6           |  | Debt Securities Indenture between MCN Investment Corp. (currently
	 doing business as MCN Energy Enterprises Inc.) and NBD Bank as
	Trustee, dated September 1, 1995 (Exhibit  4-1 to
	Registration Statement No. 33-63311).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|        | 4- | 7           |  | MCN hereby agrees to furnish to the SEC, upon request, a copy of
	any instruments defining the rights of holders of long-term debt
	issued by MCN or its subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              



---



##### Table of Contents



|        |     |             |  |                                                                                                                                                                                                            
|------- | --- | ----------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|No.     |     | Description
|        |     |            
|        | 4-  | 8           |  | Form of Guarantee Agreement with Respect to Preferred Securities
	of MCN Michigan Limited Partnership (Exhibit 4-8 to
	Registration Statement No. 33-55665).                                               
|        | 4-  | 9           |  | Amended and Restated Limited Partnership Agreement of MCN
	Michigan Limited Partnership (Exhibit 4-8 to Registration
	Statement No. 33-55665) Partnership (Exhibit 4-1 to
	October 26, 1994 Form 8-K).     
|        | 4-  | 10          |  | Form of MCN Energy Group Inc. Series A Subordinated
	Deferrable Interest Debt Security for $100,000,000 (Exhibit 
	 4-6 to October 26, 1994 Form 8-K).                                                     
|        | 4-  | 11          |  | Form of MCN Energy Group Inc. Series A Subordinated
	Deferrable Interest Debt Security for $1,100,000 (Exhibit 
	4-7 to October 26, 1994 Form 8-K).                                                        
|        | 4-  | 12          |  | Amended and Restated Declaration of Trust of MCN Financing I,
	dated as of July 24, 1996 (Exhibit 5-1 to July 24,
	 1996 Form 8-K).                                                                        
|        | 4-  | 13          |  | Preferred Securities Guarantee Agreement, dated as of July 
	26, 1996, between MCN and Wilmington Trust Company (Exhibit 
	 5-4 to July 24, 1996 Form 8-K).                                                
|        | 4-  | 14          |  | Form of Preferred Security of MCN Financing I (Annex I
	to the Amended and Restated Declaration of Trust of MCN
	Financing I included as Exhibit 4-12 hereto).                                             
|        | 4-  | 15          |  | Purchase Contract Agreement dated March 25, 1997 between MCN
	 and The First National Bank of Chicago, as Purchase Contract
	Agent (Exhibit 5-5 to March 19, 1997 Form 8-K).                               
|        | 4-  | 16          |  | Pledge Agreement dated March 25, 1997 among MCN, Chase
	Manhattan Bank, as Collateral Agent, and The First National Bank
	of Chicago, as Purchase Contract Agent (Exhibit 5-6 to
	March 19, 1997 Form 8-K).
|        | 4-  | 17          |  | Form of FELINE PRIDES Certificate (Exhibit A to the Purchase
	 Contract Agreement included as Exhibit 4-15 hereto).                                                                                        
|        | 4-  | 18          |  | Amended and Restated Declaration of Trust of MCN Financing III,
	dated as of March 19, 1997 (Exhibit 5-2 to
	March 19, 1997 Form 8-K).                                                                     
|        | 4-  | 19          |  | Preferred Securities Guarantee Agreement, dated as of March 
	 19, 1997, between MCN and Wilmington Trust Company
	(Exhibit  5-4 to March 19, 1997 Form 8-K).                                              
|        | 4-  | 20          |  | Form of Preferred Security of MCN Financing III
	(Annex I to the Amended and Restated Declaration of Trust of
	 MCN Financing III included as Exhibit 4-18 hereto).                                        
|        | 4-  | 21          |  | Amended and Restated Declaration of Trust of MCN Financing II,
	dated as of November 18, 1998 (Exhibit 5-2 to
	November 13, 1998 Form 8-K).                                                                
|        | 4-  | 22          |  | Preferred Securities Guarantee Agreement, dated as of
	November 18, 1998 (Exhibit 5-4 to November 13,
	1998 Form  8-K).                                                                                    
|        | 4-  | 23          |  | Form of Preferred Security of MCN Financing II (Annex I
	 to the Amended and Restated Declaration of Trust of MCN
	Financing II included as Exhibit 4-21 hereto).                                          
|        | 10- | 1           |  | MCN Stock Option Plan Post-Effective Amendment No. 1
	(Registration Statement No. 33-21930-99).                                                                                                            
|        | 10- | 2           |  | Form of Employment Agreement (Exhibit 99-2 to June 30,
	1997 Form 10-Q).                                                                                                                                   
|        | 10- | 3           |  | MCN Energy Group Inc. Executive Annual Performance Plan, as
	amended (Exhibit 4-3 to MCNs 1998 Form 10-K).                                                                                                
|        | 10- | 4           |  | MCN Energy Group Inc. Stock Incentive Plan as amended.*                                                                                                                                                    
|        | 10- | 5           |  | MCN Executive Deferred Compensation Plan, as amended.*                                                                                                                                                     
|        | 10- | 6           |  | MichCon Supplemental Death Benefit and Retirement Income Plan, as
	 amended.*                                                                                                                              
|        | 10- | 7           |  | MCN Energy Group Inc. Supplemental Retirement Plan, as amended.*                                                                                                                                           
|        | 10- | 8           |  | MCN Energy Group Inc. Mandatory Deferred Compensation Plan, as
	amended.*                                                                                                                                  



---



##### Table of Contents



|        |     |             |  |                                                                                                                                                                                                                                                                                                                                  
|------- | --- | ----------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |     |            
|No.     |     | Description
|        |     |            
|        | 10- | 9           |  | MCN Energy Group Inc. Supplemental Savings Plan, as amended.*                                                                                                                                                                                                                                                                    
|        | 10- | 10          |  | MCN Energy Group Inc. Nonemployee Directors Compensation
	Plan, as amended (Exhibit 99-1 to June 30, 1997
	Form  10-Q).                                                                                                                                                                                                         
|        | 10- | 11          |  | MCN Energy Group Inc. Long-Term Incentive Performance Share Plan,
	 as amended.*                                                                                                                                                                                                                                                 
|        | 10- | 12          |  | MCN Energy Group Savings and Stock Ownership Plan, as amended
	(Exhibit 10-14 to 1998 Form 10-K).                                                                                                                                                                                                                                
|        | 10- | 13          |  | MichCon Investment and Stock Ownership Plan, as amended
	(Exhibit 10-15 to 1998 Form 10-K).                                                                                                                                                                                                                                      
|        | 10- | 14          |  | Remarketing Agreement, dated as of March 31, 1998, between
	MCN Investment Corporation, MCN Energy Group Inc. and Merrill
	Lynch, Pierce, Fenner & Smith, Incorporated with respect to
	MCN Investment Corporations 6.30% MandatOry Par Put
	Remarketed Securities due April 2, 2011 (Exhibit 10-1
	to March 31, 1998 Form 8-K).
|        | 10- | 15          |  | Remarketing Agreement, dated as of March 31, 1998, between
	MCN Investment Corporation, MCN Energy Group Inc. and Merrill
	Lynch, Pierce, Fenner & Smith Incorporated with respect to
	MCN Investment Corporations 6.35% MandatOry Par Put
	Remarketed Securities due April 2, 2012 (Exhibit 10-2
	to March 31, 1998 Form 8-K). 
|        | 10- | 16          |  | Reset Remarketing Agreement, dated as of June 23, 1998, by
	and between Michigan Consolidated Gas Company and Salomon
	Brothers Inc. (Exhibit 10-1 to June 18, 1998
	Form 8-K).                                                                                                                                                  
|        | 10- | 17          |  | Reset Remarketing Agreement, dated as of June 23, 1998, by
	and between Michigan Consolidated Gas Company and Merrill Lynch
	& Co./ Merrill Lynch, Pierce, Fenner and Smith Incorporated
	(Exhibit 10-2 to June 18, 1998 Form 8-K).                                                                                              
|        | 12- | 1           |  | Computation of Ratio of Earnings to Fixed Charges for MCN Energy
	Group Inc.*                                                                                                                                                                                                                                                    
|        | 12- | 2           |  | Computation of Ratio of Earnings to Fixed Charges for MCN Energy
	Enterprises Inc.*                                                                                                                                                                                                                                              
|        | 21- | 1           |  | List of MCN Subsidiaries (Part I Nature of Business of
	 Claimants and Every Subsidiary Thereof to the
	December  31, 1999 Form U-3A-2).                                                                                                                                                                                       
|        | 23- | 1           |  | Independent Auditors Consent  Deloitte &
	Touche LLP.*                                                                                                                                                                                                                                                                         
|        | 24- | 1           |  | Powers of Attorney.*                                                                                                                                                                                                                                                                                                             
|        | 27- | 1           |  | Financial Data Schedule.*                                                                                                                                                                                                                                                                                                        



|  |                                   
|- | ----------------------------------
|* | Indicates document filed herewith.

References are to MCNs File No. 1-10070 for the MCN
documents incorporated by reference and MichCons File
No. 1-7310 for the MichCon documents incorporated by
reference.