##### Table of Contents









SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



---

FORM 10-Q

(Mark One)

[X]

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the quarterly period ended March 31, 2000, or

[   ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


For the transition period from
                    to

Commission file number 1-10070

MCN ENERGY GROUP INC.

(Exact name of registrant as specified in its charter)

Michigan





500 Griswold Street, Detroit, Michigan



38-2820658






48226



Registrants telephone number, including area code 313-256-5500

No Changes

(Former name, former address and former fiscal
year, if changed since last report.)

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 
 [   ]

Number of shares outstanding of
each of the registrants classes of common stock, as of
May 12, 2000:

Common Stock, par value $.01 per share: 85,655,381



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TABLE OF CONTENTS



|                                                                                      |  |  |  |  |  |  |  | 
|------------------------------------------------------------------------------------- |  |  |  |  |  |  |  | 
|Managements Discussion and Analysis of Financial Condition and Results of Operations
|MARKET RISK INFORMATION                                                              
|NEW ACCOUNTING PRONOUNCEMENTS                                                        
|FORWARD-LOOKING STATEMENTS                                                           
|AVAILABLE INFORMATION                                                                
|Consolidated Statement of Financial Position (Unaudited)                             
|Consolidated Statement of Financial Position (Unaudited)                             
|Consolidated Statement of Operations (Unaudited)                                     
|Consolidated Statement of Retained Earnings (Deficit) (Unaudited)                    
|Consolidated Statement of Cash Flows (Unaudited)                                     
|Notes to the Consolidated Financial Statements                                       
|Consolidating Statement of Financial Position                                        
|Consolidating Statement of Financial Position                                        
|Consolidating Statements of Operations                                               
|Other Information Exhibits and Reports on Form 8-K                                   
|Signature                                                                            
|Exhibit Index                                                                        



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INDEX TO FORM 10-Q

For Quarter Ended March 31, 2000

|                                                                                               |  |        |    | 
|---------------------------------------------------------------------------------------------- |  | ------ | -- | 
|                                                                                               |  | Page  
|                                                                                               |  | Number
|                                                                                               |  |       
|COVER                                                                                          |  |        | i  | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|INDEX                                                                                          |  |        | ii | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|PART I   FINANCIAL INFORMATION                                                                |  |        |    | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Item 1. Financial Statements                                                                   |  |        | 18 | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Item 2. Managements Discussion and Analysis of
	Financial Condition and Results of Operations |  |        | 1  | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|PART II  OTHER INFORMATION                                                                    |  |        |    | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|Item 6. Exhibits and Reports on Form 8-K                                                       |  |        | 38 | 
|                                                                                              
|                                                                                              
|                                                                                              
|                                                                                              
|SIGNATURE                                                                                      |  |        | 39 | 

ii



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##### Table of Contents








MANAGEMENTS DISCUSSION AND ANALYSIS


OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS

Results for quarter reflect warmer weather, reduced
contributions from MichCons gas sales program and Energy
Marketing losses MCNs earnings for the 2000
 first quarter were $58.9 million or $.67 per diluted
share compared with earnings of $85.5 million or
$1.02 per diluted share in the 1999 first quarter. MCN
experienced a loss in the 2000 twelve-month period of
$57.4 million or $.68 per share compared with a loss of
 $279.8 million or $3.54 per share in the same 1999
period. As subsequently discussed, the comparability of earnings
was affected by the impact of several unusual items, merger costs
 and an accounting change.

|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |        |  
|----------------------------------------------- | ------------------------------------- | ------- | ---- | --------- | - | ---- | ---- | ---- |  | - | ------ | ----- | - | - | ------ | ------ | -
|                                               
|                                               
|                                                |                                       |         |      |          
|                                                |                                       | Quarter |      | 12 Months
|                                                |                                       |         |      |          
|                                                |                                       | 2000    |      | 1999      |   | 2000 |      | 1999
|                                                |                                       |         |      |           |   |      |      |     
|(in Millions)                                   |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|Net Income (Loss)                               |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|Diversified Energy:                             |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         | $    | (16.1     | ) |      | $    | 2.1  |  |   | $      | (52.7 | ) |   | $      | (4.2   | )
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3)                |         |      | 8.4       |   |      |      | 2.0  |  |   |        | (84.6 | ) |   |        | (366.1 | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      |          |   |      |      |     |  |   |        | (5.9  | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | (7.7 | )         |   |      | 4.1  |      |  |   | (143.2 | )     |   |   | (370.3 | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|Gas Distribution:                               |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         |      | 66.8      |   |      |      | 84.3 |  |   |        | 102.8 |   |   |        | 110.1  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3f)               |         |      |          |   |      |      |     |  |   |        |      |   |   |        | (16.7  | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      | (.2       | ) |      |      |     |  |   |        | (17.0 | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | 66.6 |           |   |      | 84.3 |      |  |   | 85.8   |       |   |   | 93.4   |       
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|Total Before Accounting Change:                 |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         |      | 50.7      |   |      |      | 86.4 |  |   |        | 50.1  |   |   |        | 105.9  |  
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3)                |         |      | 8.4       |   |      |      | 2.0  |  |   |        | (84.6 | ) |   |        | (382.8 | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      | (.2       | ) |      |      |     |  |   |        | (22.9 | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | 58.9 |           |   |      | 88.4 |      |  |   | (57.4  | )     |   |   | (276.9 | )     
|                                               
|                                               
|                                               
|                                               
|Cumulative Effect of Accounting Change (Note 5) |                                       |         |     |           |   |      | (2.9 | )    |  |   |       |       |   |   | (2.9   | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       | $       | 58.9 |           |   | $    | 85.5 |      |  | $ | (57.4  | )     |   | $ | (279.8 | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|Diluted Earnings (Loss) Per Share               |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|Diversified Energy:                             |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         | $    | (.16      | ) |      | $    | .05  |  |   | $      | (.62  | ) |   | $      | (.05   | )
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3)                |         |      | .09       |   |      |      | .02  |  |   |        | (1.00 | ) |   |        | (4.63  | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      |          |   |      |      |     |  |   |        | (.07  | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | (.07 | )         |   |      | .07  |      |  |   | (1.69  | )     |   |   | (4.68  | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|Gas Distribution:                               |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         |      | .74       |   |      |      | .99  |  |   |        | 1.21  |   |   |        | 1.39   |  
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3f)               |         |      |          |   |      |      |     |  |   |        |      |   |   |        | (.21   | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      |          |   |      |      |     |  |   |        | (.20  | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | .74  |           |   |      | .99  |      |  |   | 1.01   |       |   |   | 1.18   |       
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|Total Before Accounting Change:                 |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               
|                                               
|                                               
|                                               
|                                                | Before unusual items and merger costs |         |      | .58       |   |      |      | 1.04 |  |   |        | .59   |   |   |        | 1.34   |  
|                                               
|                                               
|                                               
|                                               
|                                                | Unusual items (Note 3)                |         |      | .09       |   |      |      | .02  |  |   |        | (1.00 | ) |   |        | (4.84  | )
|                                               
|                                               
|                                               
|                                               
|                                                | Merger costs (Note 2)                 |         |      |          |   |      |      |     |  |   |        | (.27  | ) |   |        |       |  
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       |         | .67  |           |   |      | 1.06 |      |  |   | (.68   | )     |   |   | (3.50  | )     
|                                               
|                                               
|                                               
|                                               
|Cumulative Effect of Accounting Change (Note 5) |                                       |         |     |           |   |      | (.04 | )    |  |   |       |       |   |   | (.04   | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                                |                                       | $       | .67  |           |   | $    | 1.02 |      |  | $ | (.68   | )     |   | $ | (3.54  | )     
|                                                |                                       |         |      |           |   |      |      |      |  |   |        |       |   |   |        |       
|                                               

1



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Excluding the unusual items, merger costs and accounting change,
MCNs earnings decreased $35.7 million or $.46 per
 diluted share in the 2000 first quarter and $55.8 million
or $.75 per share in the 2000 twelve-month period, as
compared to the corresponding 1999 periods. The earnings
comparisons reflect losses within the Diversified Energy group,
largely due to Energy Marketings operations, and reduced
contributions from the Gas Distribution segment primarily
resulting from warmer weather.

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 expected 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 itself and
aggregating the transportation and storage capacity required to
deliver gas to the Gas Distribution, Energy Marketing and Power
segments.

Energy Marketingconsists 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.

Powerdevelops and manages independent electric 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 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. While it still is possible for
 the merger to close in mid- to late 2000, discussions continue
with the Federal Trade Commission and a final closing date cannot
 be determined with certainty. MCN recorded legal, accounting,
employee benefit and other expenses associated with the merger
which had the effect of reducing earnings by $.2 million for
 the 2000 first quarter and $22.9 million or $.27 per share
for the 2000 twelve-month period. MCN will incur additional
merger-related costs during 2000.

Unusual items  As discussed in
MCNs 1999 Annual Report on Form 10-K and
Note 3 to the Consolidated Financial Statements included
herein, MCN recorded several unusual items in the 2000 and 1999
periods, consisting of gains and losses on asset sales, property
write-downs,

2



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


investment and contract losses, and restructuring charges. The
unusual items increased earnings in the 2000 and 1999 first
quarters, and reduced earnings for the 2000 and 1999 twelve-month
 periods.

|                                        |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |        |  
|--------------------------------------- | ---------------------------------- | ------- | --- | --------- |  | ---- | --- | ---- |  | - | ----- | ----- | - | - | ------ | ------ | -
|                                       
|                                       
|                                        |                                    |         |     |          
|                                        |                                    | Quarter |     | 12 Months
|                                        |                                    |         |     |          
|                                        |                                    | 2000    |     | 1999      |  | 2000 |     | 1999
|                                        |                                    |         |     |           |  |      |     |     
|(in Millions, except Per Share Amounts) |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|                                       
|                                       
|                                       
|                                       
|Unusual Items (Net of Taxes)            |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|Diversified Energy                      |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|                                       
|                                       
|                                       
|                                       
|                                        | Pipelines & Processing (Note 3a)   |         | $   | 2.2       |  |      | $   |     |  |   | $     | 2.2   |   |   | $      | (89.5  | )
|                                       
|                                       
|                                       
|                                       
|                                        | Electric Power (Note 3b)           |         |     | 2.4       |  |      |     |     |  |   |       | (.8   | ) |   |        | (1.6   | )
|                                       
|                                       
|                                       
|                                       
|                                        | Energy Marketing (Note 3c)         |         |     |          |  |      |     |     |  |   |       | (1.6  | ) |   |        |       |  
|                                       
|                                       
|                                       
|                                       
|                                        | Exploration & Production (Note 3d) |         |     | 3.8       |  |      |     | 2.0  |  |   |       | (84.4 | ) |   |        | (268.2 | )
|                                       
|                                       
|                                       
|                                       
|                                        | Corporate & Other (Note 3e)        |         |     |          |  |      |     |     |  |   |       |      |   |   |        | (6.8   | )
|                                        |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|                                        |                                    |         | 8.4 |           |  |      | 2.0 |      |  |   | (84.6 | )     |   |   | (366.1 | )     
|                                       
|                                       
|                                       
|                                       
|Gas Distribution (Note 3f)              |                                    |         |    |           |  |      |    |      |  |   |      |       |   |   | (16.7  | )     
|                                        |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|                                        |                                    | $       | 8.4 |           |  | $    | 2.0 |      |  | $ | (84.6 | )     |   | $ | (382.8 | )     
|                                        |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|Earnings (Loss) Per Share               |                                    | $       | .09 |           |  | $    | .02 |      |  | $ | (1.00 | )     |   | $ | (4.84  | )     
|                                        |                                    |         |     |           |  |      |     |      |  |   |       |       |   |   |        |       
|                                       

Diversified Energy

Results reflect Energy Marketing losses and asset
sales The Diversified Energy groups losses
were $7.7 million for the 2000 first quarter compared to
earnings of $4.1 million for the same 1999 period.
Diversified Energy had losses of $143.2 million in the 2000
twelve-month period compared to losses of $370.3 million in
the corresponding 1999 period. The comparability of results was
impacted by several unusual items and merger costs, as previously
 discussed. Excluding the unusual items and merger costs,
Diversified Energys earnings declined by $18.2 million
 in the current quarter and $48.5 million in the current
2000 twelve-month period. The results for both 2000 periods

3



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


reflect losses of the Energy Marketing segment and reduced
earnings attributable to the sale of Exploration & Production
 (E&P) properties and joint venture interest in power
projects.

|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |         |  
|------------------------------------ | ------------------------------------------------- | ------- | ----- | --------- | - | ---- | ----- | ----- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                    
|                                    
|                                     |                                                   |         |       |          
|                                     |                                                   | Quarter |       | 12 Months
|                                     |                                                   |         |       |          
|                                     |                                                   | 2000    |       | 1999      |   | 2000 |       | 1999 
|                                     |                                                   |         |       |           |   |      |       |      
|(in Millions)                        |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|Diversified Energy Operations        |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|Operating Revenues*                  |                                                   | $       | 455.8 |           |   | $    | 293.5 |       |   | $ | 1,487.0 |         |   | $ | 1,014.4 |        
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Operating Expenses*                  |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual items (Note 3)                            |         |       | (12.9     | ) |      |       | (3.0  | ) |   |         | 122.7   |   |   |         | 557.1   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Merger costs (Note 2)                             |         |       |          |   |      |       |      |   |   |         | 9.1     |   |   |         |        |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other operating expenses                          |         |       | 468.8     |   |      |       | 279.5 |   |   |         | 1,519.8 |   |   |         | 1,002.3 |  
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                     |                                                   |         | 455.9 |           |   |      | 276.5 |       |   |   | 1,651.6 |         |   |   | 1,559.4 |        
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Operating Income (Loss)              |                                                   |         | (.1   | )         |   |      | 17.0  |       |   |   | (164.6  | )       |   |   | (545.0  | )      
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Equity in Earnings of Joint Ventures |                                                   |         | 10.2  |           |   |      | 12.0  |       |   |   | 48.6    |         |   |   | 56.8    |        
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Other Income & (Deductions)*         |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Interest income                                   |         |       |          |   |      |       | .5    |   |   |         | 3.7     |   |   |         | 2.4     |  
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense                                  |         |       | (13.3     | ) |      |       | (16.8 | ) |   |         | (59.9   | ) |   |         | (61.2   | )
|                                    
|                                    
|                                    
|                                    
|                                     | Dividends on preferred securities of subsidiaries |         |       | (8.6      | ) |      |       | (10.3 | ) |   |         | (38.4   | ) |   |         | (36.9   | )
|                                    
|                                    
|                                    
|                                    
|                                     | Investment losses (Note 3d)                       |         |       |          |   |      |       |      |   |   |         | (7.4    | ) |   |         | (6.1    | )
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                             |         |       | (.7       | ) |      |       | 3.2   |   |   |         | 3.7     |   |   |         | 3.3     |  
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                     |                                                   |         | (22.6 | )         |   |      | (23.4 | )     |   |   | (98.3   | )       |   |   | (98.5   | )      
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Income (Loss) Before Income Taxes    |                                                   |         | (12.5 | )         |   |      | 5.6   |       |   |   | (214.3  | )       |   |   | (586.7  | )      
|                                    
|                                    
|                                    
|                                    
|Income Tax Provision (Benefit)       |                                                   |         | (4.8  | )         |   |      | 1.5   |       |   |   | (71.1   | )       |   |   | (216.4  | )      
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|Net Income (Loss)                    |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    
|                                    
|                                    
|                                    
|                                     | Before unusual items                              |         |       | (16.1     | ) |      |       | 2.1   |   |   |         | (52.7   | ) |   |         | (4.2    | )
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual items and merger costs (Notes 2 and 3)    |         |       | 8.4       |   |      |       | 2.0   |   |   |         | (90.5   | ) |   |         | (366.1  | )
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                     |                                                   | $       | (7.7  | )         |   | $    | 4.1   |       |   | $ | (143.2  | )       |   | $ | (370.3  | )      
|                                     |                                                   |         |       |           |   |      |       |       |   |   |         |         |   |   |         |        
|                                    



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

Operating and Joint Venture Income



4



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


segments, as well as higher Corporate & Other expenses.
Additionally, the 2000 periods were impacted by an increase in
Pipelines & Processing earnings.

|                                             |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |      |  
|-------------------------------------------- | ------------------------ | ------- | ---- | --------- | - | ---- | ---- | ---- |  | - | ------ | ----- | - | - | ------ | ---- | -
|                                            
|                                            
|                                             |                          |         |      |          
|                                             |                          | Quarter |      | 12 Months
|                                             |                          |         |      |          
|                                             |                          | 2000    |      | 1999      |   | 2000 |      | 1999
|                                             |                          |         |      |           |   |      |      |     
|(in Millions)                                |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                            
|                                            
|                                            
|                                            
|Operating and Joint Venture Income (Loss)    |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                            
|                                            
|                                            
|                                            
|Before Unusual Items:                        |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                            
|                                            
|                                            
|                                            
|                                             | Pipelines & Processing   |         | $    | 5.8       |   |      | $    | 4.9  |  |   | $      | 20.1  |   |   | $      | 16.9 |  
|                                            
|                                            
|                                            
|                                            
|                                             | Electric Power           |         |      | 1.8       |   |      |      | 7.5  |  |   |        | 17.2  |   |   |        | 27.9 |  
|                                            
|                                            
|                                            
|                                            
|                                             | Energy Marketing         |         |      | (11.9     | ) |      |      | 5.2  |  |   |        | (28.5 | ) |   |        | 1.0  |  
|                                            
|                                            
|                                            
|                                            
|                                             | Exploration & Production |         |      | 2.7       |   |      |      | 8.1  |  |   |        | 9.3   |   |   |        | 28.4 |  
|                                            
|                                            
|                                            
|                                            
|                                             | Corporate & Other        |         |      | (1.2      | ) |      |      | .3   |  |   |        | (2.3  | ) |   |        | (5.3 | )
|                                             |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                             |                          |         | (2.8 | )         |   |      | 26.0 |      |  |   | 15.8   |       |   |   | 68.9   |     
|                                            
|                                            
|                                            
|                                            
|Unusual Items and Merger Costs (Notes 2 & 3) |                          |         | 12.9 |           |   |      | 3.0  |      |  |   | (131.8 | )     |   |   | (557.1 | )   
|                                             |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                             |                          | $       | 10.1 |           |   | $    | 29.0 |      |  | $ | (116.0 | )     |   | $ | (488.2 | )   
|                                             |                          |         |      |           |   |      |      |      |  |   |        |       |   |   |        |     
|                                            

Pipelines & Processingoperating and joint
venture results, excluding unusual items, increased by
$.9 million and $3.2 million for the 2000 first quarter
 and twelve-month period, respectively. The 2000 periods reflect
increased earnings from MCNs 25%-owned methanol production
business resulting from higher methanol prices and margins as
well as an increase in methanol volumes produced. Pipelines &
 Processings average methanol sales prices increased 24%
for the 2000 first quarter and 11% for the 2000 twelve-month
period. Methanol production rose 9.0 and 13.4 million
gallons for the current quarter and twelve-month period,
respectively, primarily due to the shut-down of the methanol
plant for scheduled maintenance in March 1999. Additionally,
Pipelines & Processing results for the 1999 twelve-month
period were impacted by operating losses related to the start-up
of its coal fines plants.

Pipelines & Processing operating and joint venture income
also reflects contributions from new and expanded gas pipeline,
gathering and processing ventures. Gas processed to remove
natural gas liquids (NGLs) increased 8.6 Bcf and 38.0 Bcf in
 the 2000 first quarter and twelve-month period, respectively. In
 addition to higher volumes associated with new ventures, the
increase was attributable to natural gas producers bypassing
processing plants in the 1999 periods as a result of weaker NGL
prices and associated processing margins. NGL prices have
strengthened in the 2000 periods.

|                                   |                                     |                             |      |           |      |      |      |      |      |  |       |       |      |  |      |       |      | 
|---------------------------------- | ----------------------------------- | --------------------------- | ---- | --------- | ---- | ---- | ---- | ---- | ---- |  | ----- | ----- | ---- |  | ---- | ----- | ---- | 
|                                  
|                                  
|                                   |                                     |                             |      |          
|                                   |                                     | Quarter                     |      | 12 Months
|                                   |                                     |                             |      |          
|                                   |                                     | 2000                        |      | 1999      |      | 2000 |      | 1999
|                                   |                                     |                             |      |           |      |      |      |     
|Pipelines & Processing Statistics* |                                     |                             |      |           |      |      |      |      |      |  |       |       |      |  |      |      
|                                  
|                                  
|                                  
|                                  
|                                   | Methanol Produced (Million Gallons) |                             |      | 17.1      |      |      |      | 8.1  |      |  |       | 66.4  |      |  |      | 53.0  |     
|                                  
|                                  
|                                  
|                                  
|                                   | Transportation (Bcf)                |                             |      | 41.3      |      |      |      | 48.1 |      |  |       | 201.8 |      |  |      | 181.7 |     
|                                  
|                                  
|                                  
|                                  
|                                   | Gas Processed (Bcf):                |                             |      |           |      |      |      |      |      |  |       |       |      |  |      |       |     
|                                  
|                                  
|                                  
|                                  
|                                   |                                     | Carbon dioxide treatment    |      |           | 12.8 |      |      |      | 12.8 |  |       |       | 51.8 |  |      |       | 49.4 | 
|                                  
|                                  
|                                  
|                                  
|                                   |                                     | Natural gas liquids removal |      |           | 17.5 |      |      |      | 8.9  |  |       |       | 81.6 |  |      |       | 43.6 | 
|                                   |                                     |                             |      |           |      |      |      |      |      |  |       |       |      |  |      |      
|                                   |                                     |                             | 30.3 |           |      |      | 21.7 |      |      |  | 133.4 |       |      |  | 93.0 |      
|                                   |                                     |                             |      |           |      |      |      |      |      |  |       |       |      |  |      |      
|                                  



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

Electric Power operating and joint venture results,
 excluding unusual items, decreased $5.7 million and
$10.7 million for the 2000 first quarter and twelve-month
period, respectively. The decline in

5



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


earnings for both periods reflects the January 2000 sale of
MCNs 23% interest in the 1,370 megawatt (MW) Midland
Cogeneration Venture facility (Note 4b). Also contributing
to the decrease in the 2000 twelve-month period was the sale of
MCNs interest in certain international power investments,
specifically its interest in the Torrent Power Limited (TPL)
venture. MCN had a 40% interest in TPL, an Indian joint venture
that holds minority interests in electric distribution companies
and power generation facilities in the state of Gujarat, India.

|                    |                                   |         |       |           |  |      |       |       |  |  |         |         |  |  |         |         | 
|------------------- | --------------------------------- | ------- | ----- | --------- |  | ---- | ----- | ----- |  |  | ------- | ------- |  |  | ------- | ------- | 
|                   
|                   
|                    |                                   |         |       |          
|                    |                                   | Quarter |       | 12 Months
|                    |                                   |         |       |          
|                    |                                   | 2000    |       | 1999      |  | 2000 |       | 1999 
|                    |                                   |         |       |           |  |      |       |      
|(Thousands of MWh)* |                                   |         |       |           |  |      |       |       |  |  |         |         |  |  |         |        
|                   
|                   
|                   
|                   
|Electric Power      |                                   |         |       |           |  |      |       |       |  |  |         |         |  |  |         |        
|                   
|                   
|                   
|                   
|                    | Electricity Sales  Domestic      |         |       | 185.2     |  |      |       | 700.8 |  |  |         | 2,240.2 |  |  |         | 2,594.5 | 
|                   
|                   
|                   
|                   
|                    | Electricity Sales  International |         |       |          |  |      |       |      |  |  |         |        |  |  |         | 1,049.5 | 
|                    |                                   |         |       |           |  |      |       |       |  |  |         |         |  |  |         |        
|                    |                                   |         | 185.2 |           |  |      | 700.8 |       |  |  | 2,240.2 |         |  |  | 3,644.0 |        
|                    |                                   |         |       |           |  |      |       |       |  |  |         |         |  |  |         |        
|                   



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

Energy Marketingoperating and joint venture
results, excluding unusual items, decreased $17.1 million
for the 2000 first quarter and $29.5 million for the 2000
twelve-month period. The declines are due primarily to lower
margins resulting from an increase in the cost of gas sold per
thousand cubic feet (Mcf). Cost of gas sold includes the effect
of the expected future cost of replacing gas withdrawn from
storage inventory. The expected future cost of such gas is based
on current forward-prices. As a result of rising gas prices, the
estimated average purchase rate for 2000 rose significantly
during the first quarter. Additionally, the impact of anticipated
 higher average gas prices during 2000 was magnified as a result
of Energy Marketing temporarily withdrawing 8.5 Bcf more of
gas from storage in the 2000 first quarter compared to the 1999
first quarter. In the 1999 first quarter, Energy Marketing met
its sales commitments with spot market gas purchases, rather than
 storage volumes, at prices significantly lower than the
estimated average purchase rate for 1999.

The decline in Energy Marketing operating and joint venture
results for both 2000 periods is also attributable to higher
costs associated with long-term transportation contracts.
Additionally, the 2000 twelve-month period reflects higher
storage costs, uncollectible expenses and costs associated with
the June 1999 dissolution of the DTE-CoEnergy joint venture.
Storage capacity, coupled with firm transportation capacity on
interstate pipelines, enhances Energy Marketings ability to
 offer reliable gas supply during peak winter months.

Partially offsetting the decline in results for both 2000 periods
 were higher gas sales and exchange gas delivery volumes, which
increased 45.8 Bcf in the current quarter and 155.8 Bcf
 in the current twelve-month period. These increases were due in
part to the April 1999 acquisitions of two companies
marketing operations that serve large commercial and industrial
customers in the Midwest.

Energy Marketings future gas sales volumes will be impacted
 as a result of its exit from two marketing joint ventures during
 2000. However, operating results are not expected to be
significantly affected. Additionally, the higher 2000 gas prices
previously discussed may result in liquidity concerns for natural
 gas brokers and marketers, including some of Energy
Marketings customers.

6



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Energy Marketing has experienced delays in the receipt of cash
from gas sales, resulting in higher accounts receivable balances.

|                 |                         |         |       |           |  |      |       |       |  |  |       |       |  |  |       |       | 
|---------------- | ----------------------- | ------- | ----- | --------- |  | ---- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                
|                
|                 |                         |         |       |          
|                 |                         | Quarter |       | 12 Months
|                 |                         |         |       |          
|                 |                         | 2000    |       | 1999      |  | 2000 |       | 1999 
|                 |                         |         |       |           |  |      |       |      
|(Bcf)*           |                         |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                
|                
|                
|                
|Energy Marketing |                         |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                
|                
|                
|                
|                 | Gas Sales               |         |       | 174.5     |  |      |       | 138.1 |  |  |       | 622.1 |  |  |       | 477.5 | 
|                
|                
|                
|                
|                 | Exchange Gas Deliveries |         |       | 14.9      |  |      |       | 5.5   |  |  |       | 21.3  |  |  |       | 10.1  | 
|                 |                         |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                 |                         |         | 189.4 |           |  |      | 143.6 |       |  |  | 643.4 |       |  |  | 487.6 |      
|                 |                         |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                



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

Exploration & Production operating and joint
venture income, excluding unusual items, decreased
$5.4 million in the 2000 first quarter and
$19.1 million in the 2000 twelve-month period. The decline
reflects a reduction in overall gas and oil production of
15.9 Bcf equivalent in the current quarter and 41.7 Bcf
 equivalent in the current twelve-month period. The lower
production levels are due primarily to the sale of MCNs
Western and Midcontinent/ Gulf Coast E&P properties in early
and mid-1999, as well as the sale of its Appalachian properties
in December 1999.

E&P results for 2000 were also impacted by an increase in
production-related expenses and an increase in the overall
average gas and oil sales prices. The increased production
expenses reflect the higher costs of operating the E&P
properties retained in Michigan. The increased average sales
prices are 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.

|                                            |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |      | 
|------------------------------------------- | ------------------------------------------------ | ------- | ---- | --------- |  | ---- | ---- | ---- |  | - | ---- | ---- |  | - | ---- | ---- | 
|                                           
|                                           
|                                            |                                                  |         |      |          
|                                            |                                                  | Quarter |      | 12 Months
|                                            |                                                  |         |      |          
|                                            |                                                  | 2000    |      | 1999      |  | 2000 |      | 1999
|                                            |                                                  |         |      |           |  |      |      |     
|Exploration & Production Statistics         |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|                                           
|                                           
|                                           
|                                           
|Gas and Oil Production (Bcf equivalent):    |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|                                           
|                                           
|                                           
|                                           
|                                            | Michigan                                         |         |      | 6.2       |  |      |      | 6.9  |  |   |      | 26.6 |  |   |      | 29.2 | 
|                                           
|                                           
|                                           
|                                           
|                                            | Western, Midcontinent/ Gulf Coast and Appalachia |         |      | .4        |  |      |      | 15.6 |  |   |      | 26.4 |  |   |      | 65.5 | 
|                                            |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|                                            |                                                  |         | 6.6  |           |  |      | 22.5 |      |  |   | 53.0 |      |  |   | 94.7 |     
|                                            |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|Production Costs (per Mcf equivalent)       |                                                  | $       | 1.03 |           |  | $    | .80  |      |  | $ | 1.02 |      |  | $ | .80  |     
|                                            |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|Average Selling Price (per Mcf equivalent)* |                                                  | $       | 2.68 |           |  | $    | 2.20 |      |  | $ | 2.29 |      |  | $ | 2.11 |     
|                                            |                                                  |         |      |           |  |      |      |      |  |   |      |      |  |   |      |     
|                                           



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

Risk management strategy  MCN manages commodity
 price risk primarily 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 segment are recorded by Energy Marketing.

Corporate & Otheroperating and joint venture
results, excluding unusual items, declined $1.5 million for
the 2000 first quarter and improved $3.0 million for the
2000 twelve-month period. The current quarter decline primarily
reflects adjustments recorded in the 1999 periods that reduced

7



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


or eliminated accruals for employee incentive awards that are
based on MCNs operating or stock-price performance. The
current twelve-month period results is attributable to a decrease
 in the proportion of administrative expenses associated with
corporate management activities charged to Diversified Energy
reflecting its declining percentage of MCNs business.

Other Income and Deductions



Income Taxes



Outlook



Gas Distribution

Results reflect warmer weather and reduced contributions from
gas sales program


8



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


sales program. The decrease in earnings for the 2000 twelve-month
 period reflects warmer weather and higher financing costs,
partially offset by increased contributions from the gas sales
program.

|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |       |  
|------------------------------------ | ----------------------------------------------- | ------- | ----- | --------- | - | ---- | ----- | ----- | - | - | ------- | ----- | - | - | ------- | ----- | -
|                                    
|                                    
|                                     |                                                 |         |       |          
|                                     |                                                 | Quarter |       | 12 Months
|                                     |                                                 |         |       |          
|                                     |                                                 | 2000    |       | 1999      |   | 2000 |       | 1999 
|                                     |                                                 |         |       |           |   |      |       |      
|(in Millions)                        |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    
|                                    
|                                    
|                                    
|Gas Distribution Operations          |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Operating Revenues*                  |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    
|                                    
|                                    
|                                    
|                                     | Gas sales                                       |         | $     | 378.7     |   |      | $     | 443.0 |   |   | $       | 860.3 |   |   | $       | 909.0 |  
|                                    
|                                    
|                                    
|                                    
|                                     | End user transportation                         |         |       | 38.9      |   |      |       | 26.9  |   |   |         | 115.9 |   |   |         | 84.1  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Intermediate transportation                     |         |       | 14.5      |   |      |       | 14.7  |   |   |         | 57.6  |   |   |         | 60.0  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                           |         |       | 21.6      |   |      |       | 25.1  |   |   |         | 80.8  |   |   |         | 73.0  |  
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                     |                                                 |         | 453.7 |           |   |      | 509.7 |       |   |   | 1,114.6 |       |   |   | 1,126.1 |      
|                                    
|                                    
|                                    
|                                    
|Cost of Sales                        |                                                 |         | 224.2 |           |   |      | 255.7 |       |   |   | 475.8   |       |   |   | 497.1   |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Gross Margin                         |                                                 |         | 229.5 |           |   |      | 254.0 |       |   |   | 638.8   |       |   |   | 629.0   |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Other Operating Expenses*            |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    
|                                    
|                                    
|                                    
|                                     | Operation and maintenance                       |         |       | 66.6      |   |      |       | 70.5  |   |   |         | 274.5 |   |   |         | 264.0 |  
|                                    
|                                    
|                                    
|                                    
|                                     | Depreciation, depletion and amortization        |         |       | 26.4      |   |      |       | 24.9  |   |   |         | 101.6 |   |   |         | 96.0  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Property and other taxes                        |         |       | 19.2      |   |      |       | 18.6  |   |   |         | 46.5  |   |   |         | 57.1  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual items (Note 3f)                         |         |       |          |   |      |       |      |   |   |         |      |   |   |         | 33.3  |  
|                                    
|                                    
|                                    
|                                    
|                                     | Merger costs (Note 2)                           |         |       | .4        |   |      |       |      |   |   |         | 26.2  |   |   |         |      |  
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                     |                                                 |         | 112.6 |           |   |      | 114.0 |       |   |   | 448.8   |       |   |   | 450.4   |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Operating Income                     |                                                 |         | 116.9 |           |   |      | 140.0 |       |   |   | 190.0   |       |   |   | 178.6   |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Equity in Earnings of Joint Ventures |                                                 |         | .6    |           |   |      | .4    |       |   |   | 2.2     |       |   |   | .9      |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Other Income and (Deductions)*       |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    
|                                    
|                                    
|                                    
|                                     | Interest income                                 |         |       | .6        |   |      |       | 1.0   |   |   |         | 1.9   |   |   |         | 5.7   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Interest expense                                |         |       | (15.5     | ) |      |       | (13.8 | ) |   |         | (58.2 | ) |   |         | (55.9 | )
|                                    
|                                    
|                                    
|                                    
|                                     | Minority interest                               |         |       | (.1       | ) |      |       | (.3   | ) |   |         | (.8   | ) |   |         | 6.1   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Other                                           |         |       | .3        |   |      |       | .4    |   |   |         | (1.5  | ) |   |         | .2    |  
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                     |                                                 |         | (14.7 | )         |   |      | (12.7 | )     |   |   | (58.6   | )     |   |   | (43.9   | )    
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Income Before Income Taxes           |                                                 |         | 102.8 |           |   |      | 127.7 |       |   |   | 133.6   |       |   |   | 135.6   |      
|                                    
|                                    
|                                    
|                                    
|Income Taxes                         |                                                 |         | 36.2  |           |   |      | 43.4  |       |   |   | 47.8    |       |   |   | 42.2    |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|Net Income                           |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    
|                                    
|                                    
|                                    
|                                     | Before unusual items and merger costs           |         |       | 66.8      |   |      |       | 84.3  |   |   |         | 102.8 |   |   |         | 110.1 |  
|                                    
|                                    
|                                    
|                                    
|                                     | Unusual items and merger costs (Notes 2 and 3f) |         |       | (.2       | ) |      |       |      |   |   |         | (17.0 | ) |   |         | (16.7 | )
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                     |                                                 | $       | 66.6  |           |   | $    | 84.3  |       |   | $ | 85.8    |       |   | $ | 93.4    |      
|                                     |                                                 |         |       |           |   |      |       |       |   |   |         |       |   |   |         |      
|                                    



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

Gross Margin



9



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


same 1999 period as a result of higher fixed-price supplies and
the loss of approximately 70,000 customers who chose to purchase
their gas from other suppliers under MichCons customer
choice program that began in April 1999. Although MichCon
has lost gas sales margins from these customers, distribution
margins are retained as MichCon continues to transport and
deliver the gas to the customers premises. MichCons
fixed-price supplies for the remainder of 2000 as well as 2001
are at prices higher than those paid in 1999. Accordingly,
margins in future periods are expected to be lower than those
generated in 1999.

The increase in gross margins for the 2000 twelve-month period
reflects higher margins generated under the gas sales program. As
 a result of the gas sales program beginning in
January 1999, the 2000 twelve-month period includes a full
years contribution, whereas the 1999 twelve-month period
includes only three months of contributions. Gross margins for
both the 2000 first quarter and the twelve-month period were also
 impacted by a decline in intermediate transportation revenues
and revenues from other gas-related services.

|                                              |                                     |                            |  |           |       |      |  |      |      |   |  |       |       |   |  |       |       |  
|--------------------------------------------- | ----------------------------------- | -------------------------- |  | --------- | ----- | ---- |  | ---- | ---- | - |  | ----- | ----- | - |  | ----- | ----- | -
|                                             
|                                             
|                                              |                                     |                            |  |          
|                                              |                                     | Quarter                    |  | 12 Months
|                                              |                                     |                            |  |          
|                                              |                                     | 2000                       |  | 1999      |       | 2000 |  | 1999
|                                              |                                     |                            |  |           |       |      |  |     
|Effect of Weather on Gas Markets and Earnings |                                     |                            |  |           |       |      |  |      |      |   |  |       |       |   |  |      
|                                             
|                                             
|                                             
|                                             
|                                              | Percent Colder (Warmer) Than Normal |                            |  | (14.2     | )%    |      |  | (4.3 | )%   |   |  | (13.9 | )%    |   |  | (12.0 | )%   
|                                             
|                                             
|                                             
|                                             
|                                              | Increase (Decrease) From Normal in: |                            |  |           |       |      |  |      |      |   |  |       |       |   |  |       |      
|                                             
|                                             
|                                             
|                                             
|                                              |                                     | Gas markets (Bcf)          |  |           | (16.1 | )    |  |      | (5.1 | ) |  |       | (29.7 | ) |  |       | (26.2 | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                     | Net income (in Millions)   |  | $         | (15.0 | )    |  | $    | (5.1 | ) |  | $     | (28.5 | ) |  | $     | (23.7 | )
|                                             
|                                             
|                                             
|                                             
|                                              |                                     | Diluted earnings per share |  | $         | (.16  | )    |  | $    | (.06 | ) |  | $     | (.34  | ) |  | $     | (.30  | )
|                                             

Gas sales and end user transportation revenuesin
total decreased $52.3 million for the 2000 first quarter and
 $16.9 million for the 2000 twelve-month period. Revenues
reflect a decline in gas sales volumes, partially offset by
higher end user transportation deliveries. Gas sales volumes
decreased 14.4 billion cubic feet (Bcf) in the 2000 first
quarter and 17.3 Bcf in the 2000 twelve-month period due
primarily to the warmer weather and customers who chose to
purchase their gas from other suppliers under MichCons
customer choice program. End user transportation deliveries
increased 9.2 Bcf in the 2000 first quarter and
20.8 Bcf in the 2000 twelve-month period. The improvement
includes volumes associated with customers participating in the
customer choice program who are reflected as end user
transportation customers rather than gas sales customers.
Accordingly, gas sales revenues have decreased, partially offset
by an increase in end user transportation revenues, resulting in
a net decrease in total operating revenues due to the gas
commodity component included in gas sales rates. Partially
offsetting the increase in end user transportation volumes
attributable to the customer choice program was the impact of
warmer weather.

The revenue comparison for the twelve-month period was also
impacted by the cost of the gas commodity component of gas sales
rates. As previously discussed, this gas commodity component was
fixed under MichCons 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

10



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


costs. The gas commodity component of MichCons sales
increased $.27 per Mcf (10%) for the 2000 twelve-month period.

|                 |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |       | 
|---------------- | ---------------------------- | ------- | ----- | --------- |  | ---- | ----- | ----- |  |  | ----- | ----- |  |  | ----- | ----- | 
|                
|                
|                 |                              |         |       |          
|                 |                              | Quarter |       | 12 Months
|                 |                              |         |       |          
|                 |                              | 2000    |       | 1999      |  | 2000 |       | 1999 
|                 |                              |         |       |           |  |      |       |      
|(Bcf)            |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                
|                
|                
|                
|Gas Distribution |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                
|                
|                
|                
|                 | Gas Sales                    |         |       | 78.2      |  |      |       | 92.6  |  |  |       | 167.4 |  |  |       | 184.7 | 
|                
|                
|                
|                
|                 | End User Transportation      |         |       | 51.7      |  |      |       | 42.5  |  |  |       | 161.2 |  |  |       | 140.4 | 
|                 |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                 |                              |         | 129.9 |           |  |      | 135.1 |       |  |  | 328.6 |       |  |  | 325.1 |      
|                
|                
|                
|                
|                 | Intermediate Transportation* |         |       | 182.8     |  |      |       | 127.4 |  |  |       | 587.4 |  |  |       | 516.5 | 
|                 |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                 |                              |         | 312.7 |           |  |      | 262.5 |       |  |  | 916.0 |       |  |  | 841.6 |      
|                 |                              |         |       |           |  |      |       |       |  |  |       |       |  |  |       |      
|                



|  |                              
|- | -----------------------------
|* | Includes intercompany volumes

Intermediate transportation revenuesdecreased
$.2 million in the 2000 first quarter and $2.4 million
in the 2000 twelve-month period, whereas intermediate
transportation deliveries increased 55.4 Bcf and
70.9 Bcf, respectively. A significant portion of the volume
increase was for customers who pay a fixed fee for intermediate
transportation capacity regardless of actual usage. Although
volumes associated with these fixed-fee customers may vary, the
related revenues are not affected. The decrease in intermediate
transportation revenues is due to non-fixed fee customers
shifting volumes from a higher rate to a lower rate
transportation route.

Other operating revenuesdecreased
$3.5 million in the 2000 first quarter and increased
$7.8 million in the 2000 twelve-month period. The current
quarter reflects a decline in storage revenues, partially offset
by an increase in late payment fees and revenues from providing
appliance maintenance services. The increase in the current
twelve-month period is attributable to revenues from the
acquisition of three heating and cooling firms in October 1998,
as well as higher late payment fees and appliance maintenance
revenues.

Cost of Sales



Cost of sales decreased $31.5 million in the 2000 first
quarter and $21.3 million in the 2000 twelve-month period,
primarily due to a decline in gas sales volumes. As previously
discussed, the decrease in sales volumes reflects the warmer
weather and customers who have chosen to purchase gas from other
suppliers under MichCons customer choice program. Partially
 offsetting the impact of lower sales volumes was an increase in
the price paid for gas purchased of $.11 per Mcf (4%) in the 2000
 first quarter and $.10 per Mcf (4%) in the 2000 twelve-month
period. Additionally, the comparison was impacted by the cost of
sales associated with the operations of the three heating and
cooling companies acquired in October 1998.

11



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Other Operating Expenses

Operation and maintenance


The increase in operation and maintenance expenses in the 2000
twelve-month period is due to additional computer system support
costs associated with MichCons new customer information
system and higher injuries and damages costs. Additionally, the
increase reflects higher incentive payments to MichCon employees.
 The higher costs of these items more than offset the benefits
from lower pension and retiree healthcare costs and environmental
 insurance proceeds.

Depreciation and depletionincreased
$1.5 million in the 2000 first quarter and $5.6 million
 in the 2000 twelve-month period reflecting depreciation on
higher plant balances.

Property and other taxesincreased $.6 million
 in the 2000 first quarter and decreased $10.6 million in
the 2000 twelve-month period. The current twelve-month period
reflects a change in the calculation of the value of personal
property subject to taxation by local governments
(Note 12a).

Unusual itemsof $33.3 million in the 1999
twelve-month period reflects a $24.8 million impairment of
certain gas gathering properties in northern Michigan as well as
an $8.5 million write-down of an investment in a small
Missouri natural-gas distribution company (Note 3f).

Merger costsof $26.2 million in the 2000
twelve-month period include 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



Other Income and Deductions



Income Taxes



12



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Outlook



MichCon has begun and plans to continue capitalizing on
opportunities resulting from the gas industry restructuring.
MichCon is currently operating under its Regulatory Reform Plan,
which includes a comprehensive experimental three-year customer
choice program that is designed to offer all sales customers
added choices and greater price certainty. Year two of the
customer choice program began April 1, 2000, and
approximately 55,000 customers have chosen to purchase natural
gas from suppliers other than MichCon. There are approximately
15,000 fewer customers participating in year two of the plan than
 in year one.

As discussed in MCNs 1999 Annual Report on
Form 10-K, 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. The suspension of the GCR mechanism
 allows MichCon to profit from its ability to purchase gas at
less than $2.95 per Mcf. As part of its gas acquisition strategy,
 MichCon entered into fixed-price contracts at costs below $2.95
per Mcf for a substantial portion of its expected gas supply
requirements through 2001. However, margins are expected to be
lower in future periods as MichCons fixed-price supplies in
 2000 and 2001 are at prices higher than those paid in 1999.

The plan increases MichCons risk associated with generating
 margins that cover its gas costs. The level of margins generated
 from selling gas will also be affected by differences between
actual gas sales volumes and the volume of fixed-price gas
supplies. Actual gas sales volumes will fluctuate as a result of
changes in weather and the number of customers who ultimately
choose to purchase gas from suppliers other than MichCon.

Change in Accounting for Start-up Costs

Reporting on the Costs of Start-up
Activities


CAPITAL RESOURCES AND LIQUIDITY

|                                          |                      |         |       |        |   |   |      |        |  
|----------------------------------------- | -------------------- | ------- | ----- | ------ | - | - | ---- | ------ | -
|                                         
|                                         
|                                          |                      |        
|                                          |                      | Quarter
|                                          |                      |        
|                                          |                      | 2000    |       | 1999  
|                                          |                      |         |       |       
|(in Millions)                             |                      |         |       |        |   |   |      |       
|                                         
|                                         
|                                         
|                                         
|Cash and Cash Equivalents                 |                      |         |       |        |   |   |      |       
|                                         
|                                         
|                                         
|                                         
|Cash Flow Provided From (Used For):       |                      |         |       |        |   |   |      |       
|                                         
|                                         
|                                         
|                                         
|                                          | Operating activities |         | $     | 245.4  |   |   | $    | 202.9  |  
|                                         
|                                         
|                                         
|                                         
|                                          | Financing activities |         |       | (521.3 | ) |   |      | (100.2 | )
|                                         
|                                         
|                                         
|                                         
|                                          | Investing activities |         |       | 240.5  |   |   |      | (84.9  | )
|                                          |                      |         |       |        |   |   |      |       
|Net Decrease in Cash and Cash Equivalents |                      | $       | (35.4 | )      |   | $ | 17.8 |       
|                                          |                      |         |       |        |   |   |      |       
|                                         

13



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Operating Activities



Financing Activities



MCNs FELINE PRIDES securities mature on May 16, 2000.
Each security initially represents a stock purchase contract and
a preferred security. 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 for
 $50. The exact number of MCN common shares to be sold is
dependent on the market value of a share for the twenty days
ending on May 12, 2000 and is expected to approximate
4,560,000 shares. Each FELINE PRIDES holder has the option to use
 the preferred securities, treasury securities or cash to satisfy
 the $50 purchase commitment. Accordingly, MCN cannot predict the
 amount of cash, if any, it will received upon issuing MCN common
 stock on May 16, 2000.

Diversified Energy



MCN received approximately $295.5 million during the 2000
first quarter from the sale of assets and joint venture interests
 which was used to repay outstanding debt. Proceeds from
additional sales are expected in 2000 and will be used to repay
outstanding borrowings and for general corporate purposes.

Gas Distribution



14



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


in July 2001. During the first three months of 2000, MichCon
 repaid $158.4 million of commercial paper, leaving
borrowings of $78.2 million outstanding under this program
at March 31, 2000.

In March 2000, MichCon repaid $12.3 million of term
debt of a non-utility subsidiary that was scheduled to mature in
2006. Additionally, MichCon repaid $20 million of first
mortgage bonds that matured in May 2000.

Investing Activities



Capital investments equaled $54.5 million in the 2000 first
quarter compared to $132.9 million for the same period in
1999. The 2000 investments include significantly lower levels of
investments within the Diversified Energy Group.

|                                                    |                          |         |      |      |  |   |       |      | 
|--------------------------------------------------- | ------------------------ | ------- | ---- | ---- |  | - | ----- | ---- | 
|                                                   
|                                                   
|                                                    |                          |        
|                                                    |                          | Quarter
|                                                    |                          |        
|                                                    |                          | 2000    |      | 1999
|                                                    |                          |         |      |     
|(in Millions)                                       |                          |         |      |      |  |   |       |     
|                                                   
|                                                   
|                                                   
|                                                   
|Capital Investments                                 |                          |         |      |      |  |   |       |     
|                                                   
|                                                   
|                                                   
|                                                   
|Consolidated Capital Expenditures:                  |                          |         |      |      |  |   |       |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Electric Power           |         | $    |     |  |   | $     | 16.5 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Exploration & Production |         |      | 1.6  |  |   |       | 39.2 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Gas Distribution         |         |      | 21.3 |  |   |       | 24.4 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Other                    |         |      | .8   |  |   |       | 1.2  | 
|                                                    |                          |         |      |      |  |   |       |     
|                                                    |                          |         | 23.7 |      |  |   | 81.3  |     
|                                                    |                          |         |      |      |  |   |       |     
|MCNs Share of Joint Venture Capital Expenditures:* |                          |         |      |      |  |   |       |     
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Pipelines & Processing   |         |      | 18.4 |  |   |       | 39.8 | 
|                                                   
|                                                   
|                                                   
|                                                   
|                                                    | Electric Power           |         |      | 12.4 |  |   |       | 11.8 | 
|                                                    |                          |         |      |      |  |   |       |     
|                                                    |                          |         | 30.8 |      |  |   | 51.6  |     
|                                                    |                          |         |      |      |  |   |       |     
|Total Capital Investments                           |                          | $       | 54.5 |      |  | $ | 132.9 |     
|                                                    |                          |         |      |      |  |   |       |     
|                                                   



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

Outlook

2000 capital investments to $325 million 


The proposed level of investments in future years is expected to
be financed 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 assets. It is managements opinion that MCN and its
subsidiaries will have sufficient capital resources, both
internal and external, to meet anticipated capital requirements.






MARKET RISK INFORMATION




15



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##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


Commodity Price Risk



As discussed in MCNs 1999 Annual Report on Form 10-K,
a sensitivity analysis calculates the fair values of MCNs
natural gas and oil futures and swap agreements given a
hypothetical 10% increase or decrease in commodity prices
utilizing applicable forward commodity rates in effect at the end
 of the reporting period.

The results of the sensitivity analysis calculations follow:

|                                  |  |                |       |                   |  |             |       |             |  |   |       |   |  |   |       |  
|--------------------------------- |  | -------------- | ----- | ----------------- |  | ----------- | ----- | ----------- |  | - | ----- | - |  | - | ----- | -
|                                 
|                                 
|                                  |  |                |       |                  
|                                  |  | March 31, 2000 |       | December 31, 1999
|                                  |  |                |       |                  
|                                  |  | Assuming       |       | Assuming          |  | Assuming    |       | Assuming   
|                                  |  | a 10%          |       | a 10%             |  | a 10%       |       | a 10%      
|                                  |  | Increase in    |       | Decrease in       |  | Increase in |       | Decrease in
|                                  |  | Commodity      |       | Commodity         |  | Commodity   |       | Commodity  
|                                  |  | Prices         |       | Prices            |  | Prices      |       | Prices     
|                                  |  |                |       |                   |  |             |       |            
|(in Millions)                     |  |                |       |                   |  |             |       |             |  |   |       |   |  |   |       |  
|Commodity Price Sensitive:*       |  |                |       |                   |  |             |       |             |  |   |       |   |  |   |       |  
|                                 
|                                 
|                                 
|                                 
|Swaps: Pay fixed/receive variable |  | $              | 92.1  |                   |  | $           | (92.1 | )           |  | $ | 89.8  |   |  | $ | (89.8 | )
|                                 
|                                 
|                                 
|                                 
|Pay
	variable/receive fixed       |  | $              | (84.1 | )                 |  | $           | 84.1  |             |  | $ | (81.1 | ) |  | $ | 81.1  |  
|                                 
|                                 
|                                 
|                                 
|Futures: Longs                    |  | $              | 2.9   |                   |  | $           | (2.9  | )           |  | $ | 5.0   |   |  | $ | (5.0  | )
|                                 
|                                 
|                                 
|                                 
|Shorts                            |  | $              | (2.7  | )                 |  | $           | 2.7   |             |  | $ | (2.1  | ) |  | $ | 2.1   |  
|                                 



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

Interest Rate Risk








NEW ACCOUNTING PRONOUNCEMENTS


Accounting for Derivative
Instruments and Hedging Activities, Accounting for Derivative Instruments and Hedging
Activities  Deferral of the Effective Date of FASB
Statement No. 133


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 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.

16



---



##### Table of Contents



MANAGEMENTS DISCUSSION AND ANALYSIS


MCN manages commodity price risk and interest rate risk through
the use of various derivative instruments and predominantly
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 and
oil prices and in interest rates. Accordingly, management cannot
quantify the effects of adopting SFAS No. 133 at this time.






FORWARD-LOOKING STATEMENTS









AVAILABLE INFORMATION




17



---



##### Table of Contents








CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)


|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |           | 
|--------------------------------------------- | -------------------------------------------------------------------------------------------------------- | -------- | --------- | ----------- |  | ---- | --------- | --------- |  | - | --------- | --------- | 
|                                             
|                                             
|                                              |                                                                                                          |          |           |            
|                                              |                                                                                                          | March 31 |           | December 31
|                                              |                                                                                                          |          |           |            
|                                              |                                                                                                          | 2000     |           | 1999        |  | 1999
|                                              |                                                                                                          |          |           |             |  |     
|(in Thousands)                                |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|ASSETS                                        |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|Current Assets                                |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Cash and cash equivalents, at cost (which approximates
	market value)                                    |          | $         | 23,996      |  |      | $         | 34,833    |  |   | $         | 59,366    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Accounts receivable, less allowance for doubtful accounts of
	$21,339, $13,411 and $20,720, respectively |          |           | 491,534     |  |      |           | 431,783   |  |   |           | 546,689   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Accrued unbilled revenues                                                                                |          |           | 68,710      |  |      |           | 77,335    |  |   |           | 100,439   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Gas in inventory (Note 7)                                                                                |          |           | 52,295      |  |      |           | 90,122    |  |   |           | 180,372   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Property taxes assessed applicable to future periods                                                     |          |           | 51,018      |  |      |           | 63,064    |  |   |           | 62,651    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred income taxes                                                                                    |          |           | 44,485      |  |      |           |          |  |   |           | 32,508    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                                                                                    |          |           | 51,344      |  |      |           | 50,062    |  |   |           | 51,313    | 
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          |          | 783,382   |             |  |      | 747,199   |           |  |   | 1,033,338 |          
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|Deferred Charges and Other Assets             |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred income taxes                                                                                    |          |           |            |  |      |           | 29,054    |  |   |           | 14,765    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Investments in debt and equity securities                                                                |          |           | 96,754      |  |      |           | 68,920    |  |   |           | 72,077    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred swap losses and receivables (Note 11)                                                           |          |           | 48,360      |  |      |           | 48,510    |  |   |           | 43,907    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Deferred environmental costs                                                                             |          |           | 28,602      |  |      |           | 31,056    |  |   |           | 31,173    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Prepaid benefit costs                                                                                    |          |           | 170,600     |  |      |           | 122,061   |  |   |           | 156,276   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                                                                                    |          |           | 95,743      |  |      |           | 107,511   |  |   |           | 108,288   | 
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          |          | 440,059   |             |  |      | 407,112   |           |  |   | 426,486   |          
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|Investments in and Advances to Joint Ventures |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Pipelines & Processing                                                                                   |          |           | 527,236     |  |      |           | 543,709   |  |   |           | 575,684   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Electric Power                                                                                           |          |           | 45,986      |  |      |           | 242,491   |  |   |           | 145,684   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Energy Marketing                                                                                         |          |           | 22,077      |  |      |           | 29,888    |  |   |           | 21,512    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Gas Distribution                                                                                         |          |           | 2,844       |  |      |           | 1,628     |  |   |           | 2,898     | 
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                                                                                    |          |           | 18,061      |  |      |           | 18,632    |  |   |           | 18,194    | 
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          |          | 616,204   |             |  |      | 836,348   |           |  |   | 763,972   |          
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|Property, Plant and Equipment                 |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             
|                                             
|                                             
|                                             
|                                              | Pipelines & Processing                                                                                   |          |           | 46,325      |  |      |           | 45,771    |  |   |           | 46,480    | 
|                                             
|                                             
|                                             
|                                             
|                                              | Exploration & Production (Note 3d)                                                                       |          |           | 569,448     |  |      |           | 1,051,512 |  |   |           | 573,514   | 
|                                             
|                                             
|                                             
|                                             
|                                              | Gas Distribution                                                                                         |          |           | 3,032,993   |  |      |           | 2,938,831 |  |   |           | 3,016,231 | 
|                                             
|                                             
|                                             
|                                             
|                                              | Other                                                                                                    |          |           | 76,243      |  |      |           | 49,446    |  |   |           | 76,245    | 
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          |          | 3,725,009 |             |  |      | 4,085,560 |           |  |   | 3,712,470 |          
|                                             
|                                             
|                                             
|                                             
|                                              | Less  Accumulated depreciation and depletion                                                            |          |           | 1,727,727   |  |      |           | 1,688,538 |  |   |           | 1,697,212 | 
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          |          | 1,997,282 |             |  |      | 2,397,022 |           |  |   | 2,015,258 |          
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                              |                                                                                                          | $        | 3,836,927 |             |  | $    | 4,387,681 |           |  | $ | 4,239,054 |          
|                                              |                                                                                                          |          |           |             |  |      |           |           |  |   |           |          
|                                             

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


18



---



##### Table of Contents








CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Unaudited)


|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |          |  
|----------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------- | -------- | --------- | ----------- | - | ---- | --------- | ------- | - | - | --------- | -------- | -
|                                                                                                           
|                                                                                                           
|                                                                                                            |                                                                 |          |           |            
|                                                                                                            |                                                                 | March 31 |           | December 31
|                                                                                                            |                                                                 |          |           |            
|                                                                                                            |                                                                 | 2000     |           | 1999        |   | 1999
|                                                                                                            |                                                                 |          |           |             |   |     
|(in Thousands)                                                                                              |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                        |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Current Liabilities                                                                                         |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Accounts payable                                                |          | $         | 299,645     |   |      | $         | 258,366 |   |   | $         | 296,139  |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Notes payable                                                   |          |           | 169,016     |   |      |           | 534,639 |   |   |           | 617,755  |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Current portion of long-term debt and capital lease obligations |          |           | 86,250      |   |      |           | 188,427 |   |   |           | 28,102   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Gas inventory equalization (Note 7)                             |          |           | 90,511      |   |      |           | 79,559  |   |   |           |         |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Federal income, property and other taxes payable                |          |           | 45,659      |   |      |           | 89,734  |   |   |           | 68,500   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Gas payable                                                     |          |           | 7,745       |   |      |           | 37,515  |   |   |           | 24,858   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Customer deposits                                               |          |           | 16,960      |   |      |           | 17,476  |   |   |           | 17,707   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Other                                                           |          |           | 124,064     |   |      |           | 98,450  |   |   |           | 146,949  |  
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                            |                                                                 |          | 839,850   |             |   |      | 1,304,166 |         |   |   | 1,200,010 |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Deferred Credits and Other Liabilities                                                                      |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Deferred income taxes                                           |          |           | 22,465      |   |      |           |        |   |   |           |         |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Unamortized investment tax credits                              |          |           | 27,537      |   |      |           | 29,569  |   |   |           | 28,022   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Tax benefits amortizable to customers                           |          |           | 135,616     |   |      |           | 129,494 |   |   |           | 136,236  |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Deferred swap gains and payables (Note 11)                      |          |           | 65,874      |   |      |           | 51,605  |   |   |           | 64,962   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Accrued environmental costs                                     |          |           | 27,711      |   |      |           | 34,888  |   |   |           | 28,068   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Minority interest                                               |          |           | 7,116       |   |      |           | 10,405  |   |   |           | 11,096   |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Other                                                           |          |           | 103,413     |   |      |           | 77,623  |   |   |           | 91,613   |  
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                            |                                                                 |          | 389,732   |             |   |      | 333,584   |         |   |   | 359,997   |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Long-Term Debt,including capital lease obligations                                                          |                                                                 |          | 1,347,195 |             |   |      | 1,392,850 |         |   |   | 1,457,617 |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|MCN-Obligated Mandatorily Redeemable Preferred Securities of
	Subsidiaries Holding Solely Debentures of MCN |                                                                 |          | 402,994   |             |   |      | 502,157   |         |   |   | 402,922   |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Commitments and Contingencies (Note 10)                                                                     |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|Common Shareholders Equity                                                                                 |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Common stock                                                    |          |           | 857         |   |      |           | 798     |   |   |           | 857      |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Additional paid-in capital                                      |          |           | 961,591     |   |      |           | 830,450 |   |   |           | 960,176  |  
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Retained earnings (deficit)                                     |          |           | (82,858     | ) |      |           | 62,775  |   |   |           | (120,081 | )
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Accumulated other comprehensive loss (Note 9)                   |          |           | (146        | ) |      |           | (16,811 | ) |   |           | (156     | )
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                           
|                                                                                                            | Yield enhancement, contract and issuance costs                  |          |           | (22,288     | ) |      |           | (22,288 | ) |   |           | (22,288  | )
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                            |                                                                 |          | 857,156   |             |   |      | 854,924   |         |   |   | 818,508   |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                            |                                                                 | $        | 3,836,927 |             |   | $    | 4,387,681 |         |   | $ | 4,239,054 |         
|                                                                                                            |                                                                 |          |           |             |   |      |           |         |   |   |           |         
|                                                                                                           

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


19



---



##### Table of Contents








CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)


|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |           |  
|-------------------------------------------------------------- | ------------------------------------------------------------------------- | ------------------ | ------- | ------------------- | - | ---- | ------- | ------- | - | - | --------- | --------- | - | - | --------- | --------- | -
|                                                              
|                                                              
|                                                               |                                                                           |                    |         |                    
|                                                               |                                                                           | Three Months Ended |         | Twelve Months Ended
|                                                               |                                                                           | March 31           |         | March 31           
|                                                               |                                                                           |                    |         |                    
|                                                               |                                                                           | 2000               |         | 1999                |   | 2000 |         | 1999   
|                                                               |                                                                           |                    |         |                     |   |      |         |        
|(in Thousands, Except Per Share Amounts)                       |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|Operating Revenues                                             |                                                                           | $                  | 903,491 |                     |   | $    | 796,586 |         |   | $ | 2,587,973 |           |   | $ | 2,125,824 |          
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Operating Expenses                                             |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cost of sales                                                             |                    |         | 652,069             |   |      |         | 473,885 |   |   |           | 1,793,176 |   |   |           | 1,255,363 |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Operation and maintenance                                                 |                    |         | 91,392              |   |      |         | 101,950 |   |   |           | 400,663   |   |   |           | 396,491   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Depreciation, depletion and amortization                                  |                    |         | 34,219              |   |      |         | 45,175  |   |   |           | 153,682   |   |   |           | 179,876   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property and other taxes                                                  |                    |         | 21,593              |   |      |         | 21,658  |   |   |           | 57,132    |   |   |           | 70,336    |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property write-downs, contract losses and restructuring charges
	(Note 3) |                    |         |                    |   |      |         |        |   |   |           | 61,782    |   |   |           | 600,818   |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gains and losses on sale of assets, net (Note 3)                          |                    |         | (12,874             | ) |      |         | (3,005  | ) |   |           | 60,956    |   |   |           | (10,403   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Merger costs (Note 2)                                                     |                    |         | 362                 |   |      |         |        |   |   |           | 35,218    |   |   |           |          |  
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                               |                                                                           |                    | 786,761 |                     |   |      | 639,663 |         |   |   | 2,562,609 |           |   |   | 2,492,481 |          
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Operating Income (Loss)                                        |                                                                           |                    | 116,730 |                     |   |      | 156,923 |         |   |   | 25,364    |           |   |   | (366,657  | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Equity in Earnings of Joint Ventures                           |                                                                           |                    | 10,779  |                     |   |      | 12,458  |         |   |   | 50,707    |           |   |   | 57,922    |          
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Other Income and (Deductions)                                  |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest income                                                           |                    |         | 2,748               |   |      |         | 1,496   |   |   |           | 7,827     |   |   |           | 8,041     |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Interest on long-term debt                                                |                    |         | (23,509             | ) |      |         | (21,902 | ) |   |           | (91,038   | ) |   |           | (90,719   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other interest expense                                                    |                    |         | (7,354              | ) |      |         | (8,635  | ) |   |           | (29,061   | ) |   |           | (26,198   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Dividends on preferred securities of subsidiaries                         |                    |         | (8,622              | ) |      |         | (10,335 | ) |   |           | (38,426   | ) |   |           | (36,951   | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investment losses (Note 3d)                                               |                    |         |                    |   |      |         |        |   |   |           | (7,456    | ) |   |           | (6,135    | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Minority interest (Note 3f)                                               |                    |         | (485                | ) |      |         | (319    | ) |   |           | (1,778    | ) |   |           | 6,283     |  
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                                     |                    |         | 6                   |   |      |         | 3,650   |   |   |           | 3,139     |   |   |           | 3,124     |  
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                               |                                                                           |                    | (37,216 | )                   |   |      | (36,045 | )       |   |   | (156,793  | )         |   |   | (142,555  | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Income (Loss) Before Income Taxes                              |                                                                           |                    | 90,293  |                     |   |      | 133,336 |         |   |   | (80,722   | )         |   |   | (451,290  | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Income Tax Provision (Benefit)                                 |                                                                           |                    | 31,351  |                     |   |      | 44,921  |         |   |   | (23,273   | )         |   |   | (174,355  | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Income (Loss) Before Cumulative Effect of Accounting
	Change   |                                                                           |                    | 58,942  |                     |   |      | 88,415  |         |   |   | (57,449   | )         |   |   | (276,935  | )        
|                                                              
|                                                              
|                                                              
|                                                              
|Cumulative Effect of Accounting Change, Net of Taxes
	(Note 5) |                                                                           |                    |        |                     |   |      | (2,872  | )       |   |   |          |           |   |   | (2,872    | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Net Income (Loss)                                              |                                                                           | $                  | 58,942  |                     |   | $    | 85,543  |         |   | $ | (57,449   | )         |   | $ | (279,807  | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Basic Earnings (Loss) Per Share (Note 8)                       |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Before cumulative effect of accounting change                             |                    | $       | .69                 |   |      | $       | 1.11    |   |   | $         | (.68      | ) |   | $         | (3.50     | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cumulative effect of accounting change (Note 5)                           |                    |         |                    |   |      |         | (.04    | ) |   |           |          |   |   |           | (.04      | )
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                               |                                                                           | $                  | .69     |                     |   | $    | 1.07    |         |   | $ | (.68      | )         |   | $ | (3.54     | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Diluted Earnings (Loss) Per Share (Note 8)                     |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Before cumulative effect of accounting change                             |                    | $       | .67                 |   |      | $       | 1.06    |   |   | $         | (.68      | ) |   | $         | (3.50     | )
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cumulative effect of accounting change (Note 5)                           |                    |         |                    |   |      |         | (.04    | ) |   |           |          |   |   |           | (.04      | )
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                               |                                                                           | $                  | .67     |                     |   | $    | 1.02    |         |   | $ | (.68      | )         |   | $ | (3.54     | )        
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Average Common Shares Outstanding                              |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Basic                                                                     |                    |         | 85,506              |   |      |         | 79,413  |   |   |           | 84,911    |   |   |           | 79,081    |  
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                               | Diluted                                                                   |                    |         | 90,948              |   |      |         | 85,064  |   |   |           | 84,911    |   |   |           | 79,081    |  
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Dividends Declared Per Share                                   |                                                                           | $                  | .2550   |                     |   | $    | .2550   |         |   | $ | 1.0200    |           |   | $ | 1.0200    |          
|                                                               |                                                                           |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                                              






CONSOLIDATED STATEMENT OF RETAINED EARNINGS (DEFICIT)
(Unaudited)


|                                 |  |                    |          |                     |  |      |        |      |  |   |         |   |  |   |          |  
|-------------------------------- |  | ------------------ | -------- | ------------------- |  | ---- | ------ | ---- |  | - | ------- | - |  | - | -------- | -
|                                
|                                
|                                 |  |                    |          |                    
|                                 |  | Three Months Ended |          | Twelve Months Ended
|                                 |  | March 31           |          | March 31           
|                                 |  |                    |          |                    
|                                 |  | 2000               |          | 1999                |  | 2000 |        | 1999
|                                 |  |                    |          |                     |  |      |        |     
|(in Thousands)                   |  |                    |          |                     |  |      |        |      |  |   |         |   |  |   |          |  
|                                
|                                
|                                
|                                
|Balance  Beginning of Period    |  | $                  | (120,081 | )                   |  | $    | (2,977 | )    |  | $ | 62,775  |   |  | $ | 424,157  |  
|                                
|                                
|                                
|                                
|Add  Net Income (Loss)          |  |                    | 58,942   |                     |  |      | 85,543 |      |  |   | (57,449 | ) |  |   | (279,807 | )
|                                 |  |                    |          |                     |  |      |        |      |  |   |         |   |  |   |          |  
|                                 |  |                    | (61,139  | )                   |  |      | 82,566 |      |  |   | 5,326   |   |  |   | 144,350  |  
|                                
|                                
|                                
|                                
|Deduct  Cash Dividends Declared |  |                    | 21,719   |                     |  |      | 19,791 |      |  |   | 88,184  |   |  |   | 81,575   |  
|                                 |  |                    |          |                     |  |      |        |      |  |   |         |   |  |   |          |  
|Balance  End of Period          |  | $                  | (82,858  | )                   |  | $    | 62,775 |      |  | $ | (82,858 | ) |  | $ | 62,775   |  
|                                 |  |                    |          |                     |  |      |        |      |  |   |         |   |  |   |          |  
|                                

The notes to the consolidated financial statements
 are an integral part of these statements


20



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##### Table of Contents








CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)


|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |         |        |         |          |  
|------------------------------------------------------------------------- | ------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------- | ------------------------------------------------------ | -------------------------------------- | ------- | ------- | -------- | ------- | ------ | ------- | -------- | -
|                                                                         
|                                                                         
|                                                                          |                                                                                            |                                                                          
|                                                                          |                                                                                            | Three Months Ended                                                       
|                                                                          |                                                                                            | March 31                                                                 
|                                                                          |                                                                                            |                                                                          
|                                                                          |                                                                                            | 2000                                                                      |                                                        | 1999                                  
|                                                                          |                                                                                            |                                                                           |                                                        |                                       
|(in Thousands)                                                            |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cash Flow From Operating Activities                                       |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Net income                                                                                 |                                                                           | $                                                      | 58,942                                 |         |         | $        | 85,543  |       
|                                                                          | Adjustments to reconcile net income (loss) to net cash
	provided from operating activities |                                                                           |                                                        |                                        |         |         |          |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Depreciation, depletion and amortization:                                 |                                                        |                                        |         |         |          |         |        |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            |                                                                           | Per statement of operations                            |                                        |         | 34,219  |          |         |        | 45,175  |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            |                                                                           | Charged to other accounts                              |                                        |         | 2,483   |          |         |        | 2,179   |         
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Unusual items, net of taxes (Note 3)                                      |                                                        |                                        | (7,037  | )       |          |         |       |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Cumulative effect of accounting change, net of taxes (Note 5)             |                                                        |                                        |        |         |          |         | 2,872  |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Deferred income taxes  current                                           |                                                        |                                        | (11,977 | )       |          |         | (5,489 | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Deferred income taxes and investment tax credits, net                     |                                                        |                                        | 32,585  |         |          |         | 22,495 |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Equity in earnings of joint ventures, net of distributions                |                                                        |                                        | (6,931  | )       |          |         | (3,390 | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Other                                                                     |                                                        |                                        | (3,837  | )       |          |         | (1,138 | )      
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Changes in assets and liabilities, exclusive of changes shown
	separately |                                                        |                                        | 146,988 |         |          |         | 54,622 |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                          |                                                                                            |                                                                           | Net cash provided from operating activities            |                                        |         | 245,435 |          |         |        | 202,869 |         
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Cash Flow From Financing Activities                                       |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Notes payable, net                                                                         |                                                                           |                                                        | (448,739                               | )       |         |          | (84,212 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Dividends paid                                                                             |                                                                           |                                                        | (21,719                                | )       |         |          | (19,791 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Issuance of common stock                                                                   |                                                                           |                                                        | 2,897                                  |         |         |          | 226     |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Reacquisition of common stock                                                              |                                                                           |                                                        | (1,655                                 | )       |         |          | (977    | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Long-term commercial paper and bank borrowings, net (Note 9)                               |                                                                           |                                                        | (34,138                                | )       |         |          | 92,344  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Retirement of long-term debt and preferred securities (Note 9)                             |                                                                           |                                                        | (17,963                                | )       |         |          | (87,781 | )     
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                          |                                                                                            |                                                                           |                                                        | Net cash used for financing activities |         |         | (521,317 | )       |        |         | (100,191 | )
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Cash Flow From Investing Activities                                       |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Capital expenditures                                                                       |                                                                           |                                                        | (23,671                                | )       |         |          | (81,320 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Acquisitions                                                                               |                                                                           |                                                        |                                       |         |         |          | (1,602  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Investment in debt and equity securities, net                                              |                                                                           |                                                        | (2,893                                 | )       |         |          | (12     | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Investment in joint ventures                                                               |                                                                           |                                                        | (28,641                                | )       |         |          | (27,648 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Sale of property and joint venture interests (Note 4)                                      |                                                                           |                                                        | 295,476                                |         |         |          | 28,986  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other                                                                                      |                                                                           |                                                        | 241                                    |         |         |          | (3,288  | )     
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                          |                                                                                            |                                                                           | Net cash provided from (used for) investing activities |                                        |         | 240,512 |          |         |        | (84,884 | )       
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Net Increase (Decrease) in Cash and Cash Equivalents                      |                                                                                            |                                                                           | (35,370                                                | )                                      |         |         | 17,794   |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|Cash and Cash Equivalents, January 1                                      |                                                                                            |                                                                           | 59,366                                                 |                                        |         |         | 17,039   |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Cash and Cash Equivalents, March 31                                       |                                                                                            | $                                                                         | 23,996                                                 |                                        |         | $       | 34,833   |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Changes in Assets and Liabilities, Exclusive of Changes Shown
	Separately |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts receivable, net                                                                   |                                                                           | $                                                      | (59,713                                | )       |         | $        | (32,348 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued unbilled revenues                                                                  |                                                                           |                                                        | 31,729                                 |         |         |          | 10,553  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas in inventory                                                                           |                                                                           |                                                        | 128,077                                |         |         |          | 57,265  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accrued/deferred gas cost recovery revenues, net                                           |                                                                           |                                                        |                                       |         |         |          | (14,980 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Prepaid/accrued benefit costs, net                                                         |                                                                           |                                                        | (13,760                                | )       |         |          | (9,678  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Accounts payable                                                                           |                                                                           |                                                        | 3,506                                  |         |         |          | (41,183 | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Federal income, property and other taxes payable                                           |                                                                           |                                                        | (22,841                                | )       |         |          | 20,269  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas payable                                                                                |                                                                           |                                                        | (17,113                                | )       |         |          | (5,154  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Gas inventory equalization                                                                 |                                                                           |                                                        | 90,511                                 |         |         |          | 79,559  |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other current assets and liabilities, net                                                  |                                                                           |                                                        | (14,153                                | )       |         |          | (5,402  | )     
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Other deferred assets and liabilities, net                                                 |                                                                           |                                                        | 20,745                                 |         |         |          | (4,279  | )     
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                          |                                                                                            | $                                                                         | 146,988                                                |                                        |         | $       | 54,622   |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|Supplemental Disclosures                                                  |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          | Cash paid during the year for:                                                             |                                                                           |                                                        |                                        |         |         |          |         |       
|                                                                         
|                                                                         
|                                                                         
|                                                                         
|                                                                          |                                                                                            | Interest, net of amounts capitalized                                      |                                                        | $                                      | 32,495  |         |          | $       | 34,673 |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                          |                                                                                            | Federal income taxes                                                      |                                                        | $                                      |        |         |          | $       |       |        
|                                                                          |                                                                                            |                                                                           |                                                        |                                        |         |         |          |        
|                                                                         

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


21



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##### Table of Contents








NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


1.  GENERAL

The accompanying consolidated financial statements should be read
 in conjunction with the MCN Energy Group Inc. (MCN) 1999
Annual Report on Form 10-K. Certain reclassifications have
been made to the prior years financial statements to
conform to the 2000 presentation. In the opinion of management,
the unaudited information furnished herein reflects all
adjustments necessary for a fair presentation of the financial
statements for the periods presented.

Because of seasonal and other factors, revenues, expenses, net
income and earnings per share for the interim periods should not
be construed as representative of revenues, expenses, net income
and earnings per share for all or any part of the balance of the
current year or succeeding periods.

2.  MERGER AGREEMENT WITH DTE ENERGY COMPANY

As discussed in MCNs 1999 Annual Report on Form 10-K,
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. While
 it still is possible for the merger to close in mid- to late
2000, discussions continue with the Federal Trade Commission and
a final closing date cannot be determined with certainty.

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 earnings by $362,000 pre-tax ($235,000 net of
taxes) and $35,217,000 pre-tax ($22,891,000 net of taxes) for the
 three-and twelve-month periods ended March 31, 2000,
respectively.

Furthermore, as part of the merger agreement, MCN agreed to sell
its interest in five power projects, four of which are defined as
 Qualifying Facilities (QFs) 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 utilities
while maintaining the projects status as a QF. In the first
 quarter of 2000, MCN completed the sale of its 23% interest in
the Midland Cogeneration Venture (MCV), a QF located in Michigan,
 and its 33 1/3% interest in the Carson Cogeneration
facility, a QF located in California. In the second quarter of
2000, MCN completed the sale of its 50% interest in the Michigan
Power Project, a QF located in Michigan, and its 50% interest in
the Ada Cogeneration facility, a QF located in Michigan.
Additionally, MCN has reached an agreement to sell its 95%
interest in the Cobisa-Person facility, a 140 megawatt (MW) power
 plant in New Mexico that is currently under construction.

3.  UNUSUAL ITEMS

a.  Pipelines &
Processing



| |                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Gain on Sale of Joint Venture:In March 2000, MCN
	recognized a $3,419,000 pre-tax ($2,222,000 net of taxes) gain
	from the sale of its 50% interest in the Cardinal States
	Gathering Company.                                                                                                        
|
| | Property Write-Downs:In the third quarter of 1998, MCN
	recorded a $133,782,000 pre-tax ($86,959,000 net of taxes)
	write-off of its coal fines project equal to the carrying value
	of its six plants, reflecting the likely inability to recover
	such costs. MCN sold four of its coal fines plants

22



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | to DTE in 1999. MCN is seeking to maximize the value of its
	investment in the two remaining plants, but is unable to predict
	the outcome of such efforts. In the third quarter of 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



| |                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Gain on Sale of Joint Venture:In March 2000, MCN
	recognized a $3,672,000 pre-tax ($2,387,000 net of taxes) gain
	from the sale of its 33 1/3% interest in the Carson
	Cogeneration facility, a 42 MW cogeneration plant located in
	Carson, California.                                                                              
|
| | Property Write-Downs:In the fourth quarter of 1999, MCN
	exited two power projects under development which were not
	consistent with its new strategic direction. As a result of
	exiting these projects, MCN recorded a $4,995,000 pre-tax
	($3,247,000 net of taxes) write-off of capitalized costs
	associated with these projects.
|
| | Restructuring Charge:In the third quarter of 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:In the fourth quarter of 1999, MCN
	recognized a $2,447,000 pre-tax ($1,591,000 net of taxes) loss
	resulting from the termination of gas sales contracts with a
	joint venture. These contracts were terminated in conjunction
	with MCNs sale of its 49% interest in the joint venture.

d.  Exploration &
Production



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property Write-Downs:In the second quarter of 1999, MCN
	recognized a $52,000,000 pre-tax ($33,800,000 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.                                                                                            
|
| | In the fourth quarter of 1999, MCN 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.                                                                                                                                                                 
|
| | In the second and third quarters of 1998, MCN recognized
	write-downs of its gas and oil properties totaling $333,022,000
	pre-tax ($216,465,000 net of taxes) and $83,955,000 pre-tax
	($54,570,000 net of taxes), respectively. 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:In the second and third
	quarters of 1999, MCN recognized losses from the sale of its
	Western and Midcontinent/ Gulf Coast E&P properties totaling
	$68,798,000 pre-tax ($44,719,000 net of taxes) and $5,877,000
	pre-tax ($3,820,000 net of taxes), respectively. In the fourth
	quarter of 1999, MCN recognized losses from the sale of its
	Appalachian E&P properties totaling $7,314,000 pre-tax
	($4,754,000 net of taxes). In the first quarter of

23



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##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 2000, subsequent adjustments related to these prior-period losses
	 reduced the losses by $3,735,000 pre-tax ($2,428,000 net of
	taxes).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | Gain on the Sale of Tax Credits:Gains are recorded in
	each period as the result of the sale of tax credits in the third
	 quarter of 1998. The purchaser forwards payments to MCN as a
	result of generating gas production credits, and accordingly, MCN
	 records the amount as a gain on the sale of the tax credits.
	Credits will continue to be generated through 2002. For the
	three- and twelve-month periods ended March 31, 2000, MCN
	recognized gains of $2,048,000 pre-tax ($1,331,000 net of taxes)
	and $10,207,000 pre-tax ($6,635,000 net of taxes), respectively.
	For the three- and twelve-month periods ended March 31,
	1999, MCN recognized gains of $3,005,000 pre-tax ($1,953,000 net
	of taxes) and $10,403,000 pre-tax ($6,762,000 net of taxes),
	respectively.
|
| | Loss on Investment:In the second quarter of 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 the second quarter of 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.                                                                                                                                                                                                                                                   

e.  Corporate & Other



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Restructuring Charge:In the third quarter of 1998, MCN
	recorded a $10,390,000 pre-tax ($6,753,000 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. As of
	March 31, 2000, payments of $7,228,000 have been charged
	against the restructuring accruals relating to severance and
	termination benefits and net lease costs. The remaining
	restructuring costs of $3,162,000 are expected to be paid through
	 2006.

f.  Gas Distribution



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Property Write-Downs:In the third quarter of 1998, MCN
	recorded a $24,800,000 pre-tax ($11,200,000 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.
|
| | Loss on Investment:In the third quarter of 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 March 2000, MCN sold its 50% interest in the Cardinal
	States Gathering Company for approximately $60,000,000.

24



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




| |                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | In April 2000, MCN reached an agreement to sell its 35%
	interest in the Jonah Gas Gathering Company for $45,000,000
	resulting in a pre-tax gain of approximately $25,000,000. The
	sale is subject to regulatory approval and is expected to be
	completed in the second quarter of 2000.

b.  Electric Power



| |                                                                                                                                                                                                                                                                                                                                                                                     
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Qualifying and Other Facilities:As discussed in
	MCNs 1999 Annual Report on Form 10-K, MCN 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 January 2000, MCN sold its 23% ownership in MCV, a 1,370
	MW cogeneration facility located in Michigan, 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 March 2000, MCN sold its 33 1/3% interest in the
	Carson Cogeneration facility, a 42 MW cogeneration plant located
	in California, for $3,000,000, resulting in a pre-tax gain of
	$3,672,000 ($2,387,000 net of taxes).                                                                                                                                                         
|
| | In April 2000, MCN completed the sale of 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, resulting in a pre-tax gain totaling
	approximately $40,000,000 ($26,000,000 net of taxes).                   
|
| | In May 2000, MCN reached an agreement to sell its 95%
	interest in the Cobisa-Person facility, a 140 MW power plant
	 that is currently under construction in New Mexico, resulting in
	 a pre-tax gain that is expected to exceed $1,500,000. The sale
	has received Federal Energy Regulatory Commission approval and is
	 expected to be completed in the second quarter of 2000.

5.  ACCOUNTING FOR START-UP ACTIVITIES

As discussed in MCNs 1999 Annual Report on Form 10-K,
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 organization costs
capitalized as of December 31, 1998. The cumulative effect
of the change was to decrease earnings by $4,418,000 pre-tax
($2,872,000 net of taxes) for the three-and twelve-month periods
ended March 31, 1999.

6.  REGULATORY MATTERS

a.  Regulatory Reform Plan



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As discussed in MCNs 1999 Annual Report on Form 10-K,
	MichCon implemented its Regulatory Reform Plan in
	January 1999. The plan includes a three-year gas sales
	program under which MichCons gas sales rates include a gas
	commodity component that is fixed at $2.95 per thousand cubic
	feet (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.

25



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS




| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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. Year two
	of the plan began in April 2000, and the number of customers
	 participating decreased to approximately 55,000. MichCon will
	continue to transport and deliver the gas to the customers
	premises at prices that generate favorable margins.
|
| | In addition, the plan encompasses an income sharing mechanism
	that allows customers to share profits when actual returns on
	equity exceed predetermined thresholds. MichCon filed its income
	sharing report with the Michigan Public Service Commission
	(MPSC) on March 31, 2000, using the MPSC approved
	formula, indicating that no income sharing was required for 1999.
	 The MPSC staff has requested a hearing on this matter.
	Management believes that no income sharing is required.                                                                          

b.  Gas Cost Recovery
Proceedings



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | The Gas Cost Recovery (GCR) process was suspended with the
	implementation of MichCons Regulatory Reform Plan in
	January 1999. 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 will 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.

7.  GAS IN INVENTORY

Inventory gas is priced on a last-in, first-out
(LIFO) basis. In anticipation that interim inventory
reductions will be replaced prior to year end, the cost of gas
for net withdrawals from inventory is recorded at the estimated
average purchase rate for the calendar year. The excess of these
charges over the LIFO cost is credited to the gas inventory
equalization account. During interim periods when there are net
injections to inventory, the equalization account is reversed.

8.  EARNINGS PER SHARE COMPUTATION

MCN reports both basic and diluted earnings per share (EPS).
Basic EPS is computed by dividing income or loss available to
common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS assumes the
issuance of potential dilutive common shares outstanding during
the period and adjusts for changes in income and the repurchase
of common shares that would have occurred with proceeds from the
assumed issuance. For the twelve-month periods, potentially
dilutive securities have been excluded from the diluted EPS

26



---



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


calculation since their inclusion would have been antidilutive. A
 reconciliation of both calculations is shown below.

|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |   | 
|-------------------------------------------- | ------------------------------ | -------------------- | ------- | -------- |  | --------- | -------- | ---- |  | ---- | ------ | ---- |  |  | ------ | ----- |  | - | ---- | - |  | - | ----- | - | 
|                                            
|                                            
|                                             |                                |                      |         |          |  |          
|                                             |                                | Net Income           |         | Weighted |  |          
|                                             |                                | (Loss) Before        |         | Average  |  | Earnings 
|                                             |                                | Cumulative Effect of |         | Common   |  | (Loss)   
|                                             |                                | Accounting Change    |         | Shares   |  | Per Share
|                                             |                                |                      |         |          |  |          
|                                             |                                | 2000                 |         | 1999     |  | 2000      |          | 1999 |  | 2000 |        | 1999
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |     
|(in Thousands, except Per Share Amounts)     |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|                                            
|                                            
|                                            
|                                            
|Three Months Ended March 31                  |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|                                            
|                                            
|                                            
|                                            
|Basic EPS                                    |                                | $                    | 58,942  |          |  | $         | 88,415   |      |  |      | 85,506 |      |  |  | 79,413 |       |  | $ | .69  |   |  | $ | 1.11  |  
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|Effect of Dilutive Securities FELINE  PRIDES |                                |                      | 1,561   |          |  |           | 1,571    |      |  |      | 4,560  |      |  |  | 4,560  |       |  |   |      |   |  |   |       |  
|                                            
|                                            
|                                            
|                                            
|                                             | Stock-based compensation plans |                      |         |         |  |           |          |     |  |      |        | 882  |  |  |        | 1,091 |  |   |      |   |  |   |       |   | 
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|Diluted EPS                                  |                                | $                    | 60,503  |          |  | $         | 89,986   |      |  |      | 90,948 |      |  |  | 85,064 |       |  | $ | .67  |   |  | $ | 1.06  |  
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|Twelve Months Ended March 31                 |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|                                            
|                                            
|                                            
|                                            
|Basic EPS                                    |                                | $                    | (57,449 | )        |  | $         | (276,935 | )    |  |      | 84,911 |      |  |  | 79,081 |       |  | $ | (.68 | ) |  | $ | (3.50 | )
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|Effect of Dilutive Securities FELINE  PRIDES |                                |                      |        |          |  |           |         |      |  |      |       |      |  |  |       |       |  |   |      |   |  |   |       |  
|                                            
|                                            
|                                            
|                                            
|                                             | Stock-based compensation plans |                      |         |         |  |           |          |     |  |      |        |     |  |  |        |      |  |   |      |   |  |   |       |   | 
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|Diluted EPS                                  |                                | $                    | (57,449 | )        |  | $         | (276,935 | )    |  |      | 84,911 |      |  |  | 79,081 |       |  | $ | (.68 | ) |  | $ | (3.50 | )
|                                             |                                |                      |         |          |  |           |          |      |  |      |        |      |  |  |        |       |  |   |      |   |  |   |       |  
|                                            

9.  COMPREHENSIVE INCOME

MCN reports comprehensive income, which is defined as the change
in common shareholders equity during a period from
transactions and events from non-owner sources, including net
income. Total comprehensive income for the applicable periods is
as follows:

|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |   |        |  
|----------------------------------------------------- | --------------------------------------- | ---------------------------------------------------------- | ------ | ------------- | -- | ---- | ------ | ---- | ---- | - | ------- | - | ------ | - | -------- | - | ------ | -
|                                                     
|                                                     
|                                                      |                                         |                                                            |        |              
|                                                      |                                         | Three Months                                               |        | Twelve Months
|                                                      |                                         | Ended                                                      |        | Ended        
|                                                      |                                         | March 31                                                   |        | March 31     
|                                                      |                                         |                                                            |        |              
|                                                      |                                         | 2000                                                       |        | 1999          |    | 2000 |        | 1999
|                                                      |                                         |                                                            |        |               |    |      |        |     
|(in Thousands)                                        |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                     
|                                                     
|                                                     
|                                                     
|Comprehensive Income (Loss)                           |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                     
|                                                     
|                                                     
|                                                     
|Net Income (Loss)                                     |                                         | $                                                          | 58,942 |               |    | $    | 85,543 |      |      | $ | (57,449 | ) |        | $ | (279,807 | )
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|Other Comprehensive Income (Loss), Net of Taxes       |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                      | Foreign currency translation adjustment |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |   |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         | Foreign currency translation adjustment                    |        |               | 10 |      |        |      | 282  |   |         |   | (671   | ) |          |   | (5,773 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         | Less: Reclassification for losses recognized in net income |        |               |   |      |        |      |     |   |         |   | 13,132 |   |          |   |       |  
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                      |                                         |                                                            | 10     |               |    |      | 282    |      |      |   | 12,461  |   |        |   | (5,773   | )
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                      | Unrealized loss on securities           |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |   |       
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         | Unrealized losses during period                            |        |               |   |      |        |      | (517 | ) |         |   | (642   | ) |          |   | (5,941 | )
|                                                     
|                                                     
|                                                     
|                                                     
|                                                      |                                         | Less: Reclassification for losses recognized in net income |        |               |   |      |        |      |     |   |         |   | 4,846  |   |          |   | 3,987  |  
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                      |                                         |                                                            |       |               |    |      | (517   | )    |      |   | 4,204   |   |        |   | (1,954   | )
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|Total Other Comprehensive Income (Loss), Net of Taxes |                                         |                                                            | 10     |               |    |      | (235   | )    |      |   | 16,665  |   |        |   | (7,727   | )
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|Total Comprehensive Income (Loss)                     |                                         | $                                                          | 58,952 |               |    | $    | 85,308 |      |      | $ | (40,784 | ) |        | $ | (287,534 | )
|                                                      |                                         |                                                            |        |               |    |      |        |      |      |   |         |   |        |   |          |  
|                                                     

27



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


10.  CONTINGENCIES

a.  Personal Property Taxes



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | As discussed in MCNs 1999 Annual Report on Form 10-K,
	in 1998, MichCon began filing its personal property tax
	information with local governments which reflected a change in
	the calculation of the value of personal property subject to
	taxation. The revised calculation excludes intangible costs from
	the value of personal property. A number of local governments
	have accepted the revised calculation, and MichCon recorded lower
	 property tax expense in 1999 and 1998 associated with the
	accepting governments. MichCon has also filed appeals to recover
	excess payments made in 1996 and 1997 based on the revised
	calculation. MichCon has pending tax appeals with local
	governments that have not accepted the revised calculation.                                                                                                                                                                                                                                                                                                                                 
|
| | 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 a
	utilitys personal property. The new tables are effective in
	 2000, however several local governments have taken legal action
	to prevent the STC from implementing the new valuation tables.
	The Michigan Tax Tribunal has requested parties to submit briefs
	to determine what is the proper scope and standard for its review
	 of the tables. It is managements belief that several local
	 governments will not use the revised tables until the legal
	actions have been resolved. The legal action, along with possible
	 additional appeals by local governments, could delay expected
	recoveries related to the new valuation tables until 2001.
|
| | Based on past practice, MichCon expects to ultimately settle
	pending tax appeals with local governments by applying the new
	tables retroactively, a solution supported in the past by the
	STC. 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.  Legal and
Administrative Proceedings



| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | MCN is involved in certain legal and administrative proceedings
	before various courts and governmental agencies concerning claims
	 arising in the ordinary course of business. 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.

28



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


11.  COMMODITY SWAP AGREEMENTS

MCNs Diversified Energy group manages commodity price risk
through the use of various derivative instruments and
predominately limit the use of such instruments to hedging
activities. The following assets and liabilities related to the
use of gas and oil swap agreements are reflected in the
Consolidated Statement of Financial Position:

|                                     |                        |          |         |             |  |      |        |        |  |   |        |        | 
|------------------------------------ | ---------------------- | -------- | ------- | ----------- |  | ---- | ------ | ------ |  | - | ------ | ------ | 
|                                    
|                                    
|                                     |                        |          |         |            
|                                     |                        | March 31 |         | December 31
|                                     |                        |          |         |            
|                                     |                        | 2000     |         | 1999        |  | 1999
|                                     |                        |          |         |             |  |     
|(in Thousands)                       |                        |          |         |             |  |      |        |        |  |   |        |       
|                                    
|                                    
|                                    
|                                    
|Deferred Swap Losses and Receivables |                        |          |         |             |  |      |        |        |  |   |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized losses      |          | $       | 18,423      |  |      | $      | 36,120 |  |   | $      | 13,884 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Receivables            |          |         | 62,425      |  |      |        | 19,012 |  |   |        | 40,089 | 
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                     |                        |          | 80,848  |             |  |      | 55,132 |        |  |   | 53,973 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Less  Current portion |          |         | 32,488      |  |      |        | 6,622  |  |   |        | 10,066 | 
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                     |                        | $        | 48,360  |             |  | $    | 48,510 |        |  | $ | 43,907 |       
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|Deferred Swap Gains and Payables     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                    
|                                    
|                                    
|                                    
|                                     | Unrealized gains       |          | $       | 23,794      |  |      | $      | 17,809 |  |   | $      | 29,596 | 
|                                    
|                                    
|                                    
|                                    
|                                     | Payables               |          |         | 77,261      |  |      |        | 41,283 |  |   |        | 48,066 | 
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                     |                        |          | 101,055 |             |  |      | 59,092 |        |  |   | 77,662 |       
|                                    
|                                    
|                                    
|                                    
|                                     | Less  Current portion |          |         | 35,181      |  |      |        | 7,487  |  |   |        | 12,700 | 
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                     |                        | $        | 65,874  |             |  | $    | 51,605 |        |  | $ | 64,962 |       
|                                     |                        |          |         |             |  |      |        |        |  |   |        |       
|                                    

29



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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


12.  SEGMENT INFORMATION

MCN is organized into two business groups, Diversified Energy and
 Gas Distribution. The groups operate five major business
segments as set forth in the following table:

|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |           |  
|------------------------------------ | -------------------------------------- | ------------------ | ------- | ------------------- | - | ---- | ------- | ------- | - | - | --------- | --------- | - | - | --------- | --------- | -
|                                    
|                                    
|                                     |                                        |                    |         |                    
|                                     |                                        | Three Months Ended |         | Twelve Months Ended
|                                     |                                        | March 31           |         | March 31           
|                                     |                                        |                    |         |                    
|                                     |                                        | 2000               |         | 1999                |   | 2000 |         | 1999   
|                                     |                                        |                    |         |                     |   |      |         |        
|(in Thousands)                       |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                    
|                                    
|                                    
|                                    
|Revenues From Unaffiliated Customers |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pipelines & Processing                 |                    | $       | 6,365               |   |      | $       | 5,905   |   |   | $         | 25,252    |   |   | $         | 24,528    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Electric Power                         |                    |         | 13,903              |   |      |         | 12,143  |   |   |           | 53,967    |   |   |           | 49,596    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Energy Marketing                       |                    |         | 428,819             |   |      |         | 242,612 |   |   |           | 1,384,915 |   |   |           | 795,167   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Exploration & Production               |                    |         | 4,616               |   |      |         | 28,914  |   |   |           | 19,073    |   |   |           | 136,542   |  
|                                    
|                                    
|                                    
|                                    
|                                     | Gas Distribution                       |                    |         | 449,788             |   |      |         | 507,012 |   |   |           | 1,104,766 |   |   |           | 1,119,991 |  
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                     |                                        |                    | 903,491 |                     |   |      | 796,586 |         |   |   | 2,587,973 |           |   |   | 2,125,824 |          
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Revenues From Affiliated Customers   |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pipelines & Processing                 |                    |         | 176                 |   |      |         | 174     |   |   |           | 2,251     |   |   |           | 346       |  
|                                    
|                                    
|                                    
|                                    
|                                     | Energy Marketing                       |                    |         | 23,673              |   |      |         | 18,085  |   |   |           | 74,381    |   |   |           | 99,618    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Exploration & Production               |                    |         | 13,145              |   |      |         | 20,585  |   |   |           | 102,279   |   |   |           | 64,448    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Gas Distribution                       |                    |         | 3,865               |   |      |         | 2,668   |   |   |           | 9,807     |   |   |           | 6,053     |  
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                     |                                        |                    | 40,859  |                     |   |      | 41,512  |         |   |   | 188,718   |           |   |   | 170,465   |          
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Eliminations                         |                                        |                    | (40,859 | )                   |   |      | (41,512 | )       |   |   | (188,718  | )         |   |   | (170,465  | )        
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Consolidated Operating Revenues      |                                        | $                  | 903,491 |                     |   | $    | 796,586 |         |   | $ | 2,587,973 |           |   | $ | 2,125,824 |          
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Net Income (Loss)                    |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                    
|                                    
|                                    
|                                    
|                                     | Pipelines & Processing                 |                    | $       | 2,720               |   |      | $       | 1,675   |   |   | $         | 5,568     |   |   | $         | (84,491   | )
|                                    
|                                    
|                                    
|                                    
|                                     | Electric Power                         |                    |         | 4,441               |   |      |         | 4,401   |   |   |           | 11,498    |   |   |           | 16,900    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Energy Marketing                       |                    |         | (8,935              | ) |      |         | 2,355   |   |   |           | (25,921   | ) |   |           | (2,094    | )
|                                    
|                                    
|                                    
|                                    
|                                     | Exploration & Production               |                    |         | 3,174               |   |      |         |        |   |   |           | (83,989   | ) |   |           | (259,171  | )
|                                    
|                                    
|                                    
|                                    
|                                     | Gas Distribution                       |                    |         | 66,691              |   |      |         | 84,293  |   |   |           | 85,853    |   |   |           | 93,371    |  
|                                    
|                                    
|                                    
|                                    
|                                     | Corporate & Other                      |                    |         | (9,149              | ) |      |         | (4,309  | ) |   |           | (50,458   | ) |   |           | (41,450   | )
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                     |                                        |                    | 58,942  |                     |   |      | 88,415  |         |   |   | (57,449   | )         |   |   | (276,935  | )        
|                                    
|                                    
|                                    
|                                    
|                                     | Cumulative effect of accounting change |                    |         |                    |   |      |         | (2,872  | ) |   |           |          |   |   |           | (2,872    | )
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|Consolidated Net Income (Loss)       |                                        | $                  | 58,942  |                     |   | $    | 85,543  |         |   | $ | (57,449   | )         |   | $ | (279,807  | )        
|                                     |                                        |                    |         |                     |   |      |         |         |   |   |           |           |   |   |           |          
|                                    

13.  CONSOLIDATING FINANCIAL STATEMENTS

Debt securities issued by MCN Energy Enterprises Inc. (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. Under the terms of the support agreement, the
assets of MCN, other than MichCon, and any 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, which primarily
consists of investments in subsidiaries other than MichCon, is
$487,767,000 at March 31, 2000.

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 II, MCN Financing III, MCN Financing
VI, and MichCon Enterprises, Inc.

30



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING STATEMENT OF FINANCIAL POSITION

|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |           |        | 
|-------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------- | --------- | ------- | --- | ------- | --------- | ------------ | ----- | ------------ | --------- | --------- | ------ | - | ---------- | -------- | - | - | --------- | --------- | ------ | 
|                                                               |                                                                 | MCN                                    |           |         |     |         |           | Eliminations |       |             
|                                                               |                                                                 | and Other                              |           |         |     |         |           | and          |       | Consolidated
|                                                               |                                                                 | Subsidiaries                           |           | MCNEE   |     | MichCon |           | Reclasses    |       | Total       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |             
|                                                               |                                                                 |                                       
|                                                               |                                                                 | March 31, 2000                        
|                                                               |                                                                 |                                       
|(in Thousands)                                                 |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|ASSETS                                                         |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Current Assets                                                 |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash and cash equivalents, at cost                              |                                        | $         | 525     |     |         | $         | 13,105       |       |              | $         | 10,366    |        |   | $          |         |   |   | $         | 23,996    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts receivable                                             |                                        |           | 16,589  |     |         |           | 290,087      |       |              |           | 219,483   |        |   |            | (13,286  | ) |   |           | 512,873   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                                 | Less  Allowance for doubtful accounts |           |         | 176 |         |           |              | 2,887 |              |           |           | 18,276 |   |            |          |  |   |           |           | 21,339 | 
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               | Accounts receivable, net                                        |                                        |           | 16,413  |     |         |           | 287,200      |       |              |           | 201,207   |        |   |            | (13,286  | ) |   |           | 491,534   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued unbilled revenues                                       |                                        |           | 966     |     |         |           |             |       |              |           | 67,744    |        |   |            |         |   |   |           | 68,710    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas in inventory                                                |                                        |           |        |     |         |           | 18,281       |       |              |           | 34,014    |        |   |            |         |   |   |           | 52,295    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property taxes assessed applicable to future periods            |                                        |           | 302     |     |         |           | 1,191        |       |              |           | 49,525    |        |   |            |         |   |   |           | 51,018    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           | (345    | )   |         |           | 51,201       |       |              |           |          |        |   |            | (6,371   | ) |   |           | 44,485    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 9,154   |     |         |           | 45,666       |       |              |           | 31,742    |        |   |            | (35,218  | ) |   |           | 51,344    |       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 27,015    |         |     |         | 416,644   |              |       |              | 394,598   |           |        |   | (54,875    | )        |   |   | 783,382   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Deferred Charges and Other Assets                              |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           | 154     |     |         |           | 89,760       |       |              |           |          |        |   |            | (89,914  | ) |   |           |          |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investments in debt and equity securities                       |                                        |           |        |     |         |           | 28,026       |       |              |           | 68,104    |        |   |            | 624      |   |   |           | 96,754    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap losses and receivables                            |                                        |           |        |     |         |           | 48,360       |       |              |           |          |        |   |            |         |   |   |           | 48,360    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred environmental costs                                    |                                        |           | 2,535   |     |         |           |             |       |              |           | 26,067    |        |   |            |         |   |   |           | 28,602    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Prepaid benefit costs                                           |                                        |           |        |     |         |           |             |       |              |           | 170,563   |        |   |            | 37       |   |   |           | 170,600   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 3,018   |     |         |           | 28,867       |       |              |           | 58,138    |        |   |            | 5,720    |   |   |           | 95,743    |       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 5,707     |         |     |         | 195,013   |              |       |              | 322,872   |           |        |   | (83,533    | )        |   |   | 440,059   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Investments in and Advances to Joint Ventures and Subsidiaries |                                                                 |                                        | 1,219,501 |         |     |         | 593,558   |              |       |              | 19,802    |           |        |   | (1,216,657 | )        |   |   | 616,204   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Property, Plant and Equipment, at cost                         |                                                                 |                                        | 44,484    |         |     |         | 675,789   |              |       |              | 3,004,736 |           |        |   |           |          |   |   | 3,725,009 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Less  Accumulated depreciation and depletion                   |                                        |           | 19,143  |     |         |           | 221,994      |       |              |           | 1,486,590 |        |   |            |         |   |   |           | 1,727,727 |       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 25,341    |         |     |         | 453,795   |              |       |              | 1,518,146 |           |        |   |           |          |   |   | 1,997,282 |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 | $                                      | 1,277,564 |         |     | $       | 1,659,010 |              |       | $            | 2,255,418 |           |        | $ | (1,355,065 | )        |   | $ | 3,836,927 |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|LIABILITIES AND CAPITALIZATION                                 |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Current Liabilities                                            |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts payable                                                |                                        | $         | 7,785   |     |         | $         | 225,492      |       |              | $         | 81,071    |        |   | $          | (14,703  | ) |   | $         | 299,645   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Notes payable                                                   |                                        |           | (40     | )   |         |           | 89,783       |       |              |           | 79,416    |        |   |            | (143     | ) |   |           | 169,016   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Current portion of long-term debt and capital lease obligations |                                        |           |        |     |         |           | 60,100       |       |              |           | 26,150    |        |   |            |         |   |   |           | 86,250    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas inventory equalization                                      |                                        |           |        |     |         |           | 9,667        |       |              |           | 80,844    |        |   |            |         |   |   |           | 90,511    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Federal income, property and other taxes payable                |                                        |           | (8,425  | )   |         |           | 3,057        |       |              |           | 78,328    |        |   |            | (27,301  | ) |   |           | 45,659    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas payable                                                     |                                        |           |        |     |         |           | 5,697        |       |              |           | 2,048     |        |   |            |         |   |   |           | 7,745     |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Customer deposits                                               |                                        |           | 16      |     |         |           |             |       |              |           | 16,944    |        |   |            |         |   |   |           | 16,960    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 8,335   |     |         |           | 68,812       |       |              |           | 53,285    |        |   |            | (6,368   | ) |   |           | 124,064   |       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 7,671     |         |     |         | 462,608   |              |       |              | 418,086   |           |        |   | (48,515    | )        |   |   | 839,850   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Deferred Credits and Other Liabilities                         |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           | (5,025  | )   |         |           |             |       |              |           | 117,250   |        |   |            | (89,760  | ) |   |           | 22,465    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Unamortized investment tax credit                               |                                        |           | 237     |     |         |           |             |       |              |           | 27,300    |        |   |            |         |   |   |           | 27,537    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Tax benefits amortizable to customers                           |                                        |           |        |     |         |           |             |       |              |           | 135,616   |        |   |            |         |   |   |           | 135,616   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap gains and payables                                |                                        |           |        |     |         |           | 65,874       |       |              |           |          |        |   |            |         |   |   |           | 65,874    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued environmental costs                                     |                                        |           | 3,000   |     |         |           |             |       |              |           | 24,711    |        |   |            |         |   |   |           | 27,711    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Minority interest                                               |                                        |           |        |     |         |           | 592          |       |              |           | 6,524     |        |   |            |         |   |   |           | 7,116     |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 11,385  |     |         |           | 33,290       |       |              |           | 58,703    |        |   |            | 35       |   |   |           | 103,413   |       
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 9,597     |         |     |         | 99,756    |              |       |              | 370,104   |           |        |   | (89,725    | )        |   |   | 389,732   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Long-Term Debt, including capital lease obligations            |                                                                 |                                        |          |         |     |         | 682,409   |              |       |              | 664,786   |           |        |   |           |          |   |   | 1,347,195 |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Redeemable Preferred Securities of Subsidiaries                |                                                                 |                                        | 402,994   |         |     |         |          |              |       |              |          |           |        |   |           |          |   |   | 402,994   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|Common Shareholders Equity                                    |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Common stock                                                    |                                        |           | 857     |     |         |           | 5            |       |              |           | 10,300    |        |   |            | (10,305  | ) |   |           | 857       |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Additional paid-in capital                                      |                                        |           | 961,591 |     |         |           | 740,746      |       |              |           | 230,399   |        |   |            | (971,145 | ) |   |           | 961,591   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Retained earnings (deficit)                                     |                                        |           | (82,858 | )   |         |           | (326,368     | )     |              |           | 561,743   |        |   |            | (235,375 | ) |   |           | (82,858   | )     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accumulated other comprehensive loss                            |                                        |           |        |     |         |           | (146         | )     |              |           |          |        |   |            |         |   |   |           | (146      | )     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Yield enhancement, contract and issuance costs                  |                                        |           | (22,288 | )   |         |           |             |       |              |           |          |        |   |            |         |   |   |           | (22,288   | )     
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 |                                        | 857,302   |         |     |         | 414,237   |              |       |              | 802,442   |           |        |   | (1,216,825 | )        |   |   | 857,156   |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          
|                                                               |                                                                 | $                                      | 1,277,564 |         |     | $       | 1,659,010 |              |       | $            | 2,255,418 |           |        | $ | (1,355,065 | )        |   | $ | 3,836,927 |          
|                                                               |                                                                 |                                        |           |         |     |         |           |              |       |              |           |           |        |   |            |          |   |   |           |          

31



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS







CONSOLIDATING STATEMENT OF FINANCIAL POSITION


|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |           |        | 
|-------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------- | --------- | ------- | -- | ------- | --------- | ------------ | ----- | ------------ | --------- | --------- | ------ | - | ---------- | ---------- | - | - | --------- | --------- | ------ | 
|                                                               |                                                                 | MCN                                    |           |         |    |         |           | Eliminations |       |             
|                                                               |                                                                 | and Other                              |           |         |    |         |           | and          |       | Consolidated
|                                                               |                                                                 | Subsidiaries                           |           | MCNEE   |    | MichCon |           | Reclasses    |       | Total       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |             
|                                                               |                                                                 |                                       
|                                                               |                                                                 | March 31, 1999                        
|                                                               |                                                                 |                                       
|(in Thousands)                                                 |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|ASSETS                                                         |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Current Assets                                                 |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Cash and cash equivalents, at cost                              |                                        | $         | 1,472   |    |         | $         | 9,849        |       |              | $         | 23,512    |        |   | $          |           |   |   | $         | 34,833    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts receivable                                             |                                        |           | 11,697  |    |         |           | 225,981      |       |              |           | 226,238   |        |   |            | (18,722    | ) |   |           | 445,194   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               |                                                                 | Less  Allowance for doubtful accounts |           |         | 93 |         |           |              | 1,773 |              |           |           | 11,545 |   |            |            |  |   |           |           | 13,411 | 
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               | Accounts receivable, net                                        |                                        |           | 11,604  |    |         |           | 224,208      |       |              |           | 214,693   |        |   |            | (18,722    | ) |   |           | 431,783   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued unbilled revenues                                       |                                        |           | 904     |    |         |           |             |       |              |           | 76,431    |        |   |            |           |   |   |           | 77,335    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas in inventory                                                |                                        |           |        |    |         |           | 65,637       |       |              |           | 24,485    |        |   |            |           |   |   |           | 90,122    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Property taxes assessed applicable to future periods            |                                        |           | 262     |    |         |           | 3,547        |       |              |           | 59,255    |        |   |            |           |   |   |           | 63,064    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           |        |    |         |           |             |       |              |           |          |        |   |            |           |   |   |           |          |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 6,130   |    |         |           | 30,974       |       |              |           | 32,990    |        |   |            | (20,032    | ) |   |           | 50,062    |       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 20,372    |         |    |         | 334,215   |              |       |              | 431,366   |           |        |   | (38,754    | )          |   |   | 747,199   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Deferred Charges and Other Assets                              |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           | 324     |    |         |           | 115,025      |       |              |           |          |        |   |            | (86,295    | ) |   |           | 29,054    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Investments in debt and equity securities                       |                                        |           |        |    |         |           | 2,209        |       |              |           | 66,110    |        |   |            | 601        |   |   |           | 68,920    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap losses and receivables                            |                                        |           |        |    |         |           | 48,510       |       |              |           |          |        |   |            |           |   |   |           | 48,510    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred environmental costs                                    |                                        |           | 2,770   |    |         |           |             |       |              |           | 28,286    |        |   |            |           |   |   |           | 31,056    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Prepaid benefit costs                                           |                                        |           |        |    |         |           |             |       |              |           | 124,235   |        |   |            | (2,174     | ) |   |           | 122,061   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 11,678  |    |         |           | 29,742       |       |              |           | 61,250    |        |   |            | 4,841      |   |   |           | 107,511   |       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 14,772    |         |    |         | 195,486   |              |       |              | 279,881   |           |        |   | (83,027    | )          |   |   | 407,112   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Investments in and Advances to Joint Ventures and Subsidiaries |                                                                 |                                        | 1,589,031 |         |    |         | 814,912   |              |       |              | 19,808    |           |        |   | (1,587,403 | )          |   |   | 836,348   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Property, Plant and Equipment, at cost                         |                                                                 |                                        | 48,826    |         |    |         | 1,125,366 |              |       |              | 2,911,368 |           |        |   |           |            |   |   | 4,085,560 |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Less  Accumulated depreciation and depletion                   |                                        |           | 17,943  |    |         |           | 250,082      |       |              |           | 1,420,513 |        |   |            |           |   |   |           | 1,688,538 |       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 30,883    |         |    |         | 875,284   |              |       |              | 1,490,855 |           |        |   |           |            |   |   | 2,397,022 |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 | $                                      | 1,655,058 |         |    | $       | 2,219,897 |              |       | $            | 2,221,910 |           |        | $ | (1,709,184 | )          |   | $ | 4,387,681 |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|LIABILITIES AND SHAREHOLDERS EQUITY                           |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Current Liabilities                                            |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accounts payable                                                |                                        | $         | 3,846   |    |         | $         | 175,097      |       |              | $         | 96,390    |        |   | $          | (16,967    | ) |   | $         | 258,366   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Notes payable                                                   |                                        |           | 237,762 |    |         |           | 188,828      |       |              |           | 107,900   |        |   |            | 149        |   |   |           | 534,639   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Current portion of long-term debt and capital lease obligations |                                        |           |        |    |         |           | 130,216      |       |              |           | 58,211    |        |   |            |           |   |   |           | 188,427   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas inventory equalization                                      |                                        |           |        |    |         |           |             |       |              |           | 79,559    |        |   |            |           |   |   |           | 79,559    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Federal income, property and other taxes payable                |                                        |           | (3,555  | )  |         |           | 4,053        |       |              |           | 103,464   |        |   |            | (14,228    | ) |   |           | 89,734    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas payable                                                     |                                        |           |        |    |         |           | 11,680       |       |              |           | 25,835    |        |   |            |           |   |   |           | 37,515    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Customer deposits                                               |                                        |           | 17      |    |         |           |             |       |              |           | 17,459    |        |   |            |           |   |   |           | 17,476    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 21,504  |    |         |           | 20,602       |       |              |           | 58,935    |        |   |            | (2,591     | ) |   |           | 98,450    |       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 259,574   |         |    |         | 530,476   |              |       |              | 547,753   |           |        |   | (33,637    | )          |   |   | 1,304,166 |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Deferred Credits and Other Liabilities                         |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred income taxes                                           |                                        |           | (10,383 | )  |         |           |             |       |              |           | 96,353    |        |   |            | (85,970    | ) |   |           |          |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Unamortized investment tax credit                               |                                        |           | 266     |    |         |           |             |       |              |           | 29,303    |        |   |            |           |   |   |           | 29,569    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Tax benefits amortizable to customers                           |                                        |           |        |    |         |           |             |       |              |           | 129,494   |        |   |            |           |   |   |           | 129,494   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Deferred swap gains and payables                                |                                        |           |        |    |         |           | 51,605       |       |              |           |          |        |   |            |           |   |   |           | 51,605    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accrued environmental costs                                     |                                        |           | 3,000   |    |         |           |             |       |              |           | 31,888    |        |   |            |           |   |   |           | 34,888    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Minority interest                                               |                                        |           |        |    |         |           | 2,230        |       |              |           | 8,175     |        |   |            |           |   |   |           | 10,405    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Other                                                           |                                        |           | 13,167  |    |         |           | 14,770       |       |              |           | 51,860    |        |   |            | (2,174     | ) |   |           | 77,623    |       
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 6,050     |         |    |         | 68,605    |              |       |              | 347,073   |           |        |   | (88,144    | )          |   |   | 333,584   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Long-Term Debt, including capital lease obligations            |                                                                 |                                        |          |         |    |         | 778,905   |              |       |              | 613,945   |           |        |   |           |            |   |   | 1,392,850 |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Redeemable Preferred Securities of Subsidiaries                |                                                                 |                                        | 502,157   |         |    |         |          |              |       |              |          |           |        |   |           |            |   |   | 502,157   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|Common Shareholders Equity                                    |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Common stock                                                    |                                        |           | 798     |    |         |           | 5            |       |              |           | 10,300    |        |   |            | (10,305    | ) |   |           | 798       |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Additional paid-in capital                                      |                                        |           | 830,450 |    |         |           | 1,042,982    |       |              |           | 230,399   |        |   |            | (1,273,381 | ) |   |           | 830,450   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Retained earnings (deficit)                                     |                                        |           | 78,317  |    |         |           | (184,265     | )     |              |           | 472,440   |        |   |            | (303,717   | ) |   |           | 62,775    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accumulated other comprehensive loss                            |                                        |           |        |    |         |           | (16,811      | )     |              |           |          |        |   |            |           |   |   |           | (16,811   | )     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Yield enhancement, contract and issuance costs                  |                                        |           | (22,288 | )  |         |           |             |       |              |           |          |        |   |            |           |   |   |           | (22,288   | )     
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 887,277   |         |    |         | 841,911   |              |       |              | 713,139   |           |        |   | (1,587,403 | )          |   |   | 854,924   |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 | $                                      | 1,655,058 |         |    | $       | 2,219,897 |              |       | $            | 2,221,910 |           |        | $ | (1,709,184 | )          |   | $ | 4,387,681 |          
|                                                               |                                                                 |                                        |           |         |    |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          

32



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS







CONSOLIDATING STATEMENT OF FINANCIAL POSITION


|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |           |        | 
|-------------------------------------------------------------- | --------------------------------------------------------------- | -------------------------------------- | --------- | -------- | --- | ------- | --------- | ------------ | ----- | ------------ | --------- | --------- | ------ | - | ---------- | ---------- | - | - | --------- | --------- | ------ | 
|                                                               |                                                                 | MCN                                    |           |          |     |         |           | Eliminations |       |             
|                                                               |                                                                 | and Other                              |           |          |     |         |           | and          |       | Consolidated
|                                                               |                                                                 | Subsidiaries                           |           | MCNEE    |     | MichCon |           | Reclasses    |       | Total       
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |             
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |             
|                                                               |                                                                 |                                       
|                                                               |                                                                 | December 31, 1999                     
|                                                               |                                                                 |                                       
|(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, at cost                         |                                                                 |                                        | 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 |          
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|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    |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Gas inventory equalization                                      |                                        |           |         |     |         |           |             |       |              |           |          |        |   |            |           |   |   |           |          |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | 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 credit                               |                                        |           | 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   |          
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|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                                    |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Common stock                                                    |                                        |           | 857      |     |         |           | 5            |       |              |           | 10,300    |        |   |            | (10,305    | ) |   |           | 857       |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Additional paid-in capital                                      |                                        |           | 960,176  |     |         |           | 969,733      |       |              |           | 230,399   |        |   |            | (1,200,132 | ) |   |           | 960,176   |       
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Retained earnings (deficit)                                     |                                        |           | (120,081 | )   |         |           | (319,604     | )     |              |           | 494,803   |        |   |            | (175,199   | ) |   |           | (120,081  | )     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Accumulated other comprehensive loss                            |                                        |           |         |     |         |           | (156         | )     |              |           |          |        |   |            |           |   |   |           | (156      | )     
|                                                              
|                                                              
|                                                              
|                                                              
|                                                               | Yield enhancement, contract and issuance costs                  |                                        |           | (22,288  | )   |         |           |             |       |              |           |          |        |   |            |           |   |   |           | (22,288   | )     
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 |                                        | 818,664   |          |     |         | 649,978   |              |       |              | 735,502   |           |        |   | (1,385,636 | )          |   |   | 818,508   |          
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          
|                                                               |                                                                 | $                                      | 1,455,491 |          |     | $       | 2,020,860 |              |       | $            | 2,282,728 |           |        | $ | (1,520,025 | )          |   | $ | 4,239,054 |          
|                                                               |                                                                 |                                        |           |          |     |         |           |              |       |              |           |           |        |   |            |            |   |   |           |          

33



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATING STATEMENTS OF OPERATIONS

|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |         |  
|----------------------------------------------------------- | --------------------------------------------------------------- | --------------------------------- | ------ | ------ | - | ------- | ------- | ------------ | - | ------------ | ------- | ------- | - | - | ------- | ------- | - | - | ------- | ------- | -
|                                                            |                                                                 | MCN                               |        |        |   |         |         | Eliminations |   |             
|                                                            |                                                                 | and Other                         |        |        |   |         |         | and          |   | Consolidated
|                                                            |                                                                 | Subsidiaries                      |        | MCNEE  |   | MichCon |         | Reclasses    |   | Total       
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |             
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |             
|                                                            |                                                                 |                                  
|                                                            |                                                                 | Three Months Ended March 31, 2000
|                                                            |                                                                 |                                  
|(in Thousands)                                              |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|Operating Revenues                                          |                                                                 | $                                 | 10,907 |        |   | $       | 455,755 |              |   | $            | 442,747 |         |   | $ | (5,918  | )       |   | $ | 903,491 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Operating Expenses                                          |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cost of sales                                                   |                                   |        | 7,709  |   |         |         | 433,000      |   |              |         | 216,520 |   |   |         | (5,160  | ) |   |         | 652,069 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Operation and maintenance                                       |                                   |        | 1,773  |   |         |         | 26,314       |   |              |         | 64,063  |   |   |         | (758    | ) |   |         | 91,392  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation, depletion and amortization                        |                                   |        | 932    |   |         |         | 7,343        |   |              |         | 25,944  |   |   |         |        |   |   |         | 34,219  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property and other taxes                                        |                                   |        | 270    |   |         |         | 2,333        |   |              |         | 18,990  |   |   |         |        |   |   |         | 21,593  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property write-downs, contract losses and restructuring charges |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Gains and losses on sale of assets, net                         |                                   |        |       |   |         |         | (12,874      | ) |              |         |        |   |   |         |        |   |   |         | (12,874 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Merger costs                                                    |                                   |        | 1      |   |         |         | 14           |   |              |         | 347     |   |   |         |        |   |   |         | 362     |  
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                            |                                                                 |                                   | 10,685 |        |   |         | 456,130 |              |   |              | 325,864 |         |   |   | (5,918  | )       |   |   | 786,761 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Operating Income (Loss)                                     |                                                                 |                                   | 222    |        |   |         | (375    | )            |   |              | 116,883 |         |   |   |        |         |   |   | 116,730 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Equity in Earnings of Joint Ventures                        |                                                                 |                                   | 60,122 |        |   |         | 10,245  |              |   |              | 587     |         |   |   | (60,175 | )       |   |   | 10,779  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Other Income and (Deductions)                               |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest income                                                 |                                   |        | 8,687  |   |         |         | 2,178        |   |              |         | 726     |   |   |         | (8,843  | ) |   |         | 2,748   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest on long-term debt                                      |                                   |        | 27     |   |         |         | (11,263      | ) |              |         | (12,273 | ) |   |         |        |   |   |         | (23,509 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other interest expense                                          |                                   |        | (1,686 | ) |         |         | (11,501      | ) |              |         | (3,009  | ) |   |         | 8,842   |   |   |         | (7,354  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Dividends on preferred securities of subsidiaries               |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         | (8,622  | ) |   |         | (8,622  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Investment losses                                               |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Minority interest                                               |                                   |        |       |   |         |         | (346         | ) |              |         | (139    | ) |   |         |        |   |   |         | (485    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other                                                           |                                   |        | (423   | ) |         |         | 109          |   |              |         | 320     |   |   |         |        |   |   |         | 6       |  
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                            |                                                                 |                                   | 6,605  |        |   |         | (20,823 | )            |   |              | (14,375 | )       |   |   | (8,623  | )       |   |   | (37,216 | )      
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Income (Loss) Before Income Taxes                           |                                                                 |                                   | 66,949 |        |   |         | (10,953 | )            |   |              | 103,095 |         |   |   | (68,798 | )       |   |   | 90,293  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Income Tax Provision (Benefit)                              |                                                                 |                                   | (615   | )      |   |         | (4,189  | )            |   |              | 36,155  |         |   |   |        |         |   |   | 31,351  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Income (Loss) Before Cumulative Effect of Accounting Change |                                                                 |                                   | 67,564 |        |   |         | (6,764  | )            |   |              | 66,940  |         |   |   | (68,798 | )       |   |   | 58,942  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Cumulative Effect of Accounting Change, Net of Taxes        |                                                                 |                                   |       |        |   |         |        |              |   |              |        |         |   |   |        |         |   |   |        |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Net Income (Loss)                                           |                                                                 |                                   | 67,564 |        |   |         | (6,764  | )            |   |              | 66,940  |         |   |   | (68,798 | )       |   |   | 58,942  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Dividends on Preferred Securities                           |                                                                 |                                   | 8,622  |        |   |         |        |              |   |              |        |         |   |   | (8,622  | )       |   |   |        |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Net Income (Loss) Available for Common Stock                |                                                                 | $                                 | 58,942 |        |   | $       | (6,764  | )            |   | $            | 66,940  |         |   | $ | (60,176 | )       |   | $ | 58,942  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                            |                                                                 | Three Months Ended March 31, 1999
|                                                            |                                                                 |                                  
|Operating Revenues                                          |                                                                 | $                                 | 11,664 |        |   | $       | 293,567 |              |   | $            | 498,090 |         |   | $ | (6,735  | )       |   | $ | 796,586 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Operating Expenses                                          |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cost of sales                                                   |                                   |        | 7,405  |   |         |         | 222,301      |   |              |         | 248,351 |   |   |         | (4,172  | ) |   |         | 473,885 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Operation and maintenance                                       |                                   |        | (1,425 | ) |         |         | 38,366       |   |              |         | 67,546  |   |   |         | (2,537  | ) |   |         | 101,950 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation, depletion and amortization                        |                                   |        | 834    |   |         |         | 19,733       |   |              |         | 24,608  |   |   |         |        |   |   |         | 45,175  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property and other taxes                                        |                                   |        | 388    |   |         |         | 2,802        |   |              |         | 18,462  |   |   |         | 6       |   |   |         | 21,658  |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property write-downs, contract losses and restructuring charges |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Gains and losses on sale of assets, net                         |                                   |        |       |   |         |         | (3,005       | ) |              |         |        |   |   |         |        |   |   |         | (3,005  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Merger costs                                                    |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                            |                                                                 |                                   | 7,202  |        |   |         | 280,197 |              |   |              | 358,967 |         |   |   | (6,703  | )       |   |   | 639,663 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Operating Income (Loss)                                     |                                                                 |                                   | 4,462  |        |   |         | 13,370  |              |   |              | 139,123 |         |   |   | (32     | )       |   |   | 156,923 |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Equity in Earnings of Joint Ventures                        |                                                                 |                                   | 85,103 |        |   |         | 12,017  |              |   |              | 441     |         |   |   | (85,103 | )       |   |   | 12,458  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Other Income and (Deductions)                               |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest income                                                 |                                   |        | 10,654 |   |         |         | 517          |   |              |         | 999     |   |   |         | (10,674 | ) |   |         | 1,496   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest on long-term debt                                      |                                   |        | 211    |   |         |         | (11,147      | ) |              |         | (10,966 | ) |   |         |        |   |   |         | (21,902 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other interest expense                                          |                                   |        | (4,162 | ) |         |         | (12,492      | ) |              |         | (2,655  | ) |   |         | 10,674  |   |   |         | (8,635  | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Dividends on preferred securities of subsidiaries               |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         | (10,335 | ) |   |         | (10,335 | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Investment losses                                               |                                   |        |       |   |         |         |             |   |              |         |        |   |   |         |        |   |   |         |        |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Minority interest                                               |                                   |        |       |   |         |         | (62          | ) |              |         | (257    | ) |   |         |        |   |   |         | (319    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other                                                           |                                   |        | (131   | ) |         |         | 3,283        |   |              |         | 464     |   |   |         | 34      |   |   |         | 3,650   |  
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|                                                            |                                                                 |                                   | 6,572  |        |   |         | (19,901 | )            |   |              | (12,415 | )       |   |   | (10,301 | )       |   |   | (36,045 | )      
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Income (Loss) Before Income Taxes                           |                                                                 |                                   | 96,137 |        |   |         | 5,486   |              |   |              | 127,149 |         |   |   | (95,436 | )       |   |   | 133,336 |        
|                                                           
|                                                           
|                                                           
|                                                           
|Income Tax Provision (Benefit)                              |                                                                 |                                   | 259    |        |   |         | 1,486   |              |   |              | 43,176  |         |   |   |        |         |   |   | 44,921  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Income (Loss) Before Cumulative Effect of Accounting Change |                                                                 |                                   | 95,878 |        |   |         | 4,000   |              |   |              | 83,973  |         |   |   | (95,436 | )       |   |   | 88,415  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Cumulative Effect of Accounting Change, Net of Taxes        |                                                                 |                                   |       |        |   |         | (2,872  | )            |   |              |        |         |   |   |        |         |   |   | (2,872  | )      
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Net Income (Loss)                                           |                                                                 |                                   | 95,878 |        |   |         | 1,128   |              |   |              | 83,973  |         |   |   | (95,436 | )       |   |   | 85,543  |        
|                                                           
|                                                           
|                                                           
|                                                           
|Dividends on Preferred Securities                           |                                                                 |                                   | 10,335 |        |   |         |        |              |   |              |        |         |   |   | (10,335 | )       |   |   |        |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        
|Net Income (Loss) Available for Common Stock                |                                                                 | $                                 | 85,543 |        |   | $       | 1,128   |              |   | $            | 83,973  |         |   | $ | (85,101 | )       |   | $ | 85,543  |        
|                                                            |                                                                 |                                   |        |        |   |         |         |              |   |              |         |         |   |   |         |         |   |   |         |        

34



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS







CONSOLIDATING STATEMENTS OF OPERATIONS


|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |           |  
|----------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------- | ------- | ------ | - | ------- | --------- | ------------ | - | ------------ | --------- | ------- | - | - | ------- | ------- | - | - | --------- | --------- | -
|                                                            |                                                                 | MCN                                |         |        |   |         |           | Eliminations |   |             
|                                                            |                                                                 | and Other                          |         |        |   |         |           | and          |   | Consolidated
|                                                            |                                                                 | Subsidiaries                       |         | MCNEE  |   | MichCon |           | Reclasses    |   | Total       
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |             
|                                                            |                                                                 |                                   
|                                                            |                                                                 | Twelve Months Ended March 31, 2000
|                                                            |                                                                 |                                   
|(in Thousands)                                              |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|Operating Revenues                                          |                                                                 | $                                  | 34,177  |        |   | $       | 1,486,877 |              |   | $            | 1,080,396 |         |   | $ | (13,477 | )       |   | $ | 2,587,973 |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Operating Expenses                                          |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cost of sales                                                   |                                    |         | 23,760 |   |         |           | 1,329,292    |   |              |           | 452,094 |   |   |         | (11,970 | ) |   |           | 1,793,176 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Operation and maintenance                                       |                                    |         | 1,471  |   |         |           | 138,106      |   |              |           | 262,621 |   |   |         | (1,535  | ) |   |           | 400,663   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation, depletion and amortization                        |                                    |         | 3,231  |   |         |           | 50,236       |   |              |           | 100,215 |   |   |         |        |   |   |           | 153,682   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property and other taxes                                        |                                    |         | 1,503  |   |         |           | 9,877        |   |              |           | 45,758  |   |   |         | (6      | ) |   |           | 57,132    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property write-downs, contract losses and restructuring charges |                                    |         |       |   |         |           | 61,782       |   |              |           |        |   |   |         |        |   |   |           | 61,782    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Gains and losses on sale of assets, net                         |                                    |         |       |   |         |           | 60,956       |   |              |           |        |   |   |         |        |   |   |           | 60,956    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Merger costs                                                    |                                    |         | 373    |   |         |           | 9,069        |   |              |           | 25,776  |   |   |         |        |   |   |           | 35,218    |  
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                                 |                                    | 30,338  |        |   |         | 1,659,318 |              |   |              | 886,464   |         |   |   | (13,511 | )       |   |   | 2,562,609 |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Operating Income (Loss)                                     |                                                                 |                                    | 3,839   |        |   |         | (172,441  | )            |   |              | 193,932   |         |   |   | 34      |         |   |   | 25,364    |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Equity in Earnings of Joint Ventures                        |                                                                 |                                    | (52,872 | )      |   |         | 48,656    |              |   |              | 2,122     |         |   |   | 52,801  |         |   |   | 50,707    |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Other Income and (Deductions)                               |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest income                                                 |                                    |         | 39,413 |   |         |           | 5,899        |   |              |           | 2,331   |   |   |         | (39,816 | ) |   |           | 7,827     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest on long-term debt                                      |                                    |         | 624    |   |         |           | (43,090      | ) |              |           | (48,572 | ) |   |         |        |   |   |           | (91,038   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other interest expense                                          |                                    |         | (9,626 | ) |         |           | (50,271      | ) |              |           | (8,980  | ) |   |         | 39,816  |   |   |           | (29,061   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Dividends on preferred securities of subsidiaries               |                                    |         |       |   |         |           |             |   |              |           |        |   |   |         | (38,426 | ) |   |           | (38,426   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Investment losses                                               |                                    |         |       |   |         |           | (7,456       | ) |              |           |        |   |   |         |        |   |   |           | (7,456    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Minority interest                                               |                                    |         |       |   |         |           | (876         | ) |              |           | (902    | ) |   |         |        |   |   |           | (1,778    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other                                                           |                                    |         | 548    |   |         |           | 3,786        |   |              |           | (1,160  | ) |   |         | (35     | ) |   |           | 3,139     |  
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                                 |                                    | 30,959  |        |   |         | (92,008   | )            |   |              | (57,283   | )       |   |   | (38,461 | )       |   |   | (156,793  | )        
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Income Taxes                           |                                                                 |                                    | (18,074 | )      |   |         | (215,793  | )            |   |              | 138,771   |         |   |   | 14,374  |         |   |   | (80,722   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Income Tax Provision (Benefit)                              |                                                                 |                                    | 949     |        |   |         | (73,690   | )            |   |              | 49,468    |         |   |   |        |         |   |   | (23,273   | )        
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Cumulative Effect of Accounting Change |                                                                 |                                    | (19,023 | )      |   |         | (142,103  | )            |   |              | 89,303    |         |   |   | 14,374  |         |   |   | (57,449   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Cumulative Effect of Accounting Change, Net of Taxes        |                                                                 |                                    |        |        |   |         |          |              |   |              |          |         |   |   |        |         |   |   |          |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss)                                           |                                                                 |                                    | (19,023 | )      |   |         | (142,103  | )            |   |              | 89,303    |         |   |   | 14,374  |         |   |   | (57,449   | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Dividends on Preferred Securities                           |                                                                 |                                    | 38,426  |        |   |         |          |              |   |              |          |         |   |   | (38,426 | )       |   |   |          |          
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss) Available for Common Stock                |                                                                 | $                                  | (57,449 | )      |   | $       | (142,103  | )            |   | $            | 89,303    |         |   | $ | 52,800  |         |   | $ | (57,449   | )        
|                                                            |                                                                 |                                    |         |        |   |         |           |              |   |              |           |         |   |   |         |         |   |   |           |          

|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |           |  
|----------------------------------------------------------- | --------------------------------------------------------------- | ---------------------------------- | -------- | ------- | - | - | --------- | ------- | - | - | --------- | ------- | - | - | ------- | ------- | - | - | --------- | --------- | -
|                                                            |                                                                 |                                   
|                                                            |                                                                 | Twelve Months Ended March 31, 1999
|                                                            |                                                                 |                                   
|                                                           
|                                                           
|                                                           
|                                                           
|Operating Revenues                                          |                                                                 | $                                  | 23,744   |         |   | $ | 1,014,541 |         |   | $ | 1,102,521 |         |   | $ | (14,982 | )       |   | $ | 2,125,824 |          
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Operating Expenses                                          |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Cost of sales                                                   |                                    |          | 14,990  |   |   |           | 767,727 |   |   |           | 482,291 |   |   |         | (9,645  | ) |   |           | 1,255,363 |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Operation and maintenance                                       |                                    |          | (11,772 | ) |   |           | 155,853 |   |   |           | 257,721 |   |   |         | (5,311  | ) |   |           | 396,491   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Depreciation, depletion and amortization                        |                                    |          | 3,394   |   |   |           | 81,436  |   |   |           | 95,046  |   |   |         |        |   |   |           | 179,876   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property and other taxes                                        |                                    |          | 1,474   |   |   |           | 12,258  |   |   |           | 56,598  |   |   |         | 6       |   |   |           | 70,336    |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Property write-downs, contract losses and restructuring charges |                                    |          | 17,169  |   |   |           | 558,849 |   |   |           | 24,800  |   |   |         |        |   |   |           | 600,818   |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Gains and losses on sale of assets, net                         |                                    |          |        |   |   |           | (10,403 | ) |   |           |        |   |   |         |        |   |   |           | (10,403   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Merger costs                                                    |                                    |          |        |   |   |           |        |   |   |           |        |   |   |         |        |   |   |           |          |  
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                                 |                                    | 25,255   |         |   |   | 1,565,720 |         |   |   | 916,456   |         |   |   | (14,950 | )       |   |   | 2,492,481 |          
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Operating Income (Loss)                                     |                                                                 |                                    | (1,511   | )       |   |   | (551,179  | )       |   |   | 186,065   |         |   |   | (32     | )       |   |   | (366,657  | )        
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Equity in Earnings of Joint Ventures                        |                                                                 |                                    | (274,807 | )       |   |   | 56,952    |         |   |   | 1,798     |         |   |   | 273,979 |         |   |   | 57,922    |          
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Other Income and (Deductions)                               |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest income                                                 |                                    |          | 37,916  |   |   |           | 3,932   |   |   |           | 5,575   |   |   |         | (39,382 | ) |   |           | 8,041     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Interest on long-term debt                                      |                                    |          | (671    | ) |   |           | (46,404 | ) |   |           | (43,644 | ) |   |         |        |   |   |           | (90,719   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other interest expense                                          |                                    |          | (6,187  | ) |   |           | (47,882 | ) |   |           | (11,511 | ) |   |         | 39,382  |   |   |           | (26,198   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Dividends on preferred securities of subsidiaries               |                                    |          |        |   |   |           |        |   |   |           |        |   |   |         | (36,951 | ) |   |           | (36,951   | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Investment losses                                               |                                    |          |        |   |   |           | (6,135  | ) |   |           |        |   |   |         |        |   |   |           | (6,135    | )
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Minority interest                                               |                                    |          |        |   |   |           | 271     |   |   |           | 6,215   |   |   |         | (203    | ) |   |           | 6,283     |  
|                                                           
|                                                           
|                                                           
|                                                           
|                                                            | Other                                                           |                                    |          | (770    | ) |   |           | 3,496   |   |   |           | 161     |   |   |         | 237     |   |   |           | 3,124     |  
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|                                                            |                                                                 |                                    | 30,288   |         |   |   | (92,722   | )       |   |   | (43,204   | )       |   |   | (36,917 | )       |   |   | (142,555  | )        
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Income Taxes                           |                                                                 |                                    | (246,030 | )       |   |   | (586,949  | )       |   |   | 144,659   |         |   |   | 273,030 |         |   |   | (451,290  | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Income Tax Provision (Benefit)                              |                                                                 |                                    | (3,174   | )       |   |   | (216,555  | )       |   |   | 45,374    |         |   |   |        |         |   |   | (174,355  | )        
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Income (Loss) Before Cumulative Effect of Accounting Change |                                                                 |                                    | (242,856 | )       |   |   | (370,394  | )       |   |   | 99,285    |         |   |   | 237,030 |         |   |   | (276,935  | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Cumulative Effect of Accounting Change, Net of Taxes        |                                                                 |                                    |         |         |   |   | (2,872    | )       |   |   |          |         |   |   |        |         |   |   | (2,872    | )        
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss)                                           |                                                                 |                                    | (242,856 | )       |   |   | (373,266  | )       |   |   | 99,285    |         |   |   | 237,030 |         |   |   | (279,807  | )        
|                                                           
|                                                           
|                                                           
|                                                           
|Dividends on Preferred Securities                           |                                                                 |                                    | 36,951   |         |   |   |          |         |   |   |          |         |   |   | (36,951 | )       |   |   |          |          
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          
|Net Income (Loss) Available for Common Stock                |                                                                 | $                                  | (279,807 | )       |   | $ | (373,266  | )       |   | $ | 99,285    |         |   | $ | 273,981 |         |   | $ | (279,807  | )        
|                                                            |                                                                 |                                    |          |         |   |   |           |         |   |   |           |         |   |   |         |         |   |   |           |          

35



---



##### Table of Contents



NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS

|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |          |          |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | ----- | -------- | -------- | ------- | ------- | ------------ | -------- | ------------ | ------- | -------- | -------- | - | ------ | -------- | -------- | - | ------- | -------- | -------- | -
|                                                     |                                                                              | MCN                                                    |       |          |          |         |         | Eliminations |          |             
|                                                     |                                                                              | and Other                                              |       |          |          |         |         | and          |          | Consolidated
|                                                     |                                                                              | Subsidiaries                                           |       | MCNEE    |          | MichCon |         | Reclasses    |          | Total       
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |             
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |             
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | Three Months Ended March 31, 2000                     
|                                                     |                                                                              |                                                       
|(in Thousands)                                       |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|Net Cash Flow From Operating Activities              |                                                                              | $                                                      | 1,264 |          |          | $       | 53,240  |              |          | $            | 199,221 |          |          | $ | (8,290 | )        |          | $ | 245,435 |         
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|Cash Flow From Financing Activities                  |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                           |                                                        |       | (200,761 | )        |         |         | (89,466      | )        |              |         | (158,369 | )        |   |        | (143     | )        |   |         | (448,739 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital contributions received from (distributions paid to)
	affiliates, net |                                                        |       |         |          |         |         | (228,987     | )        |              |         |         |          |   |        | 228,987  |          |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                               |                                                        |       | (21,719  | )        |         |         |             |          |              |         |         |          |   |        |         |          |   |         | (21,719  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred securities dividends paid                                          |                                                        |       | (8,622   | )        |         |         |             |          |              |         |         |          |   |        | 8,622    |          |   |         |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                     |                                                        |       | 2,897    |          |         |         |             |          |              |         |         |          |   |        |         |          |   |         | 2,897    |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reacquisition of common stock                                                |                                                        |       | (1,655   | )        |         |         |             |          |              |         |         |          |   |        |         |          |   |         | (1,655   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net                          |                                                        |       |         |          |         |         | (34,138      | )        |              |         |         |          |   |        |         |          |   |         | (34,138  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities                        |                                                        |       |         |          |         |         | (38          | )        |              |         | (17,925  | )        |   |        |         |          |   |         | (17,963  | )       
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) financing activities |       |          | (229,860 | )       |         |              | (352,629 | )            |         |          | (176,294 | ) |        |          | 237,466  |   |         |          | (521,317 | )
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|Cash Flow From Investing Activities                  |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                         |                                                        |       | (378     | )        |         |         | (2,330       | )        |              |         | (20,963  | )        |   |        |         |          |   |         | (23,671  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                |                                                        |       |         |          |         |         | (2,000       | )        |              |         | (893     | )        |   |        |         |          |   |         | (2,893   | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures and subsidiaries                                |                                                        |       | 228,987  |          |         |         | (28,641      | )        |              |         |         |          |   |        | (228,987 | )        |   |         | (28,641  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests                                 |                                                        |       |         |          |         |         | 296,340      |          |              |         |         |          |   |        | (864     | )        |   |         | 295,476  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |       | 42       |          |         |         | (66          | )        |              |         | (410     | )        |   |        | 675      |          |   |         | 241      |         
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|                                                     |                                                                              | Net cash provided from (used for) investing activities |       |          | 228,651  |         |         |              | 263,303  |              |         |          | (22,266  | ) |        |          | (229,176 | ) |         |          | 240,512  |  
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                              |                                                        | 55    |          |          |         | (36,086 | )            |          |              | 661     |          |          |   |       |          |          |   | (35,370 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                              |                                                        | 470   |          |          |         | 49,191  |              |          |              | 9,705   |          |          |   |       |          |          |   | 59,366  |         
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         
|Cash and Cash Equivalents, March 31                  |                                                                              | $                                                      | 525   |          |          | $       | 13,105  |              |          | $            | 10,366  |          |          | $ |       |          |          | $ | 23,996  |         
|                                                     |                                                                              |                                                        |       |          |          |         |         |              |          |              |         |          |          |   |        |          |          |   |         |         

|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |         |          |  
|---------------------------------------------------- | ---------------------------------------------------------------------------- | ------------------------------------------------------ | ------ | ------- | ------- | - | ------ | ------- | ------- | - | ------- | -------- | -------- | - | ------- | ------- | ------- | - | ------- | ------- | -------- | -
|                                                     |                                                                              |                                                       
|                                                     |                                                                              | Three Months Ended March 31, 1999                     
|                                                     |                                                                              |                                                       
|Net Cash Flow From Operating Activities              |                                                                              | $                                                      | 20,753 |         |         | $ | 27,288 |         |         | $ | 179,713 |          |          | $ | (24,885 | )       |         | $ | 202,869 |        
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|Cash Flow From Financing Activities                  |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Notes payable, net                                                           |                                                        |        | (23,009 | )       |   |        | 51,066  |         |   |         | (113,269 | )        |   |         | 1,000   |         |   |         | (84,212 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital contributions received from (distributions paid to)
	affiliates, net |                                                        |        |        |         |   |        | (28,408 | )       |   |         |         |          |   |         | 28,408  |         |   |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Dividends paid                                                               |                                                        |        | (19,791 | )       |   |        |        |         |   |         | (17,500  | )        |   |         | 17,500  |         |   |         | (19,791 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Preferred securities dividends paid                                          |                                                        |        | (5,125  | )       |   |        |        |         |   |         |         |          |   |         | 5,125   |         |   |         |        |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Issuance of common stock                                                     |                                                        |        | 226     |         |   |        |        |         |   |         |         |          |   |         |        |         |   |         | 226     |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Reacquisition of common stock                                                |                                                        |        | (977    | )       |   |        |        |         |   |         |         |          |   |         |        |         |   |         | (977    | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Long-term commercial paper and bank borrowings, net                          |                                                        |        |        |         |   |        | 92,344  |         |   |         |         |          |   |         |        |         |   |         | 92,344  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Retirement of long-term debt and preferred securities                        |                                                        |        |        |         |   |        | (81,847 | )       |   |         | (5,934   | )        |   |         |        |         |   |         | (87,781 | )       
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|                                                     |                                                                              | Net cash provided from (used for) financing activities |        |         | (48,676 | ) |        |         | 33,155  |   |         |          | (136,703 | ) |         |         | 52,033  |   |         |         | (100,191 | )
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|Cash Flow From Investing Activities                  |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Capital expenditures                                                         |                                                        |        | (381    | )       |   |        | (56,730 | )       |   |         | (24,209  | )        |   |         |        |         |   |         | (81,320 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Acquisitions                                                                 |                                                        |        |        |         |   |        | (1,602  | )       |   |         |         |          |   |         |        |         |   |         | (1,602  | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in debt and equity securities, net                                |                                                        |        |        |         |   |        | 542     |         |   |         |         |          |   |         | (554    | )       |   |         | (12     | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Investment in joint ventures and subsidiaries                                |                                                        |        | 28,258  |         |   |        | (27,482 | )       |   |         | (16      | )        |   |         | (28,408 | )       |   |         | (27,648 | )       
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Sale of property and joint venture interests                                 |                                                        |        |        |         |   |        | 29,560  |         |   |         |         |          |   |         | (574    | )       |   |         | 28,986  |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Return of investment in joint ventures                                       |                                                        |        |        |         |   |        | 1,136   |         |   |         |         |          |   |         |        |         |   |         | 1,136   |         
|                                                    
|                                                    
|                                                    
|                                                    
|                                                     | Other                                                                        |                                                        |        | 118     |         |   |        | (5,054  | )       |   |         | (1,876   | )        |   |         | 2,388   |         |   |         | (4,424  | )       
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|                                                     |                                                                              | Net cash provided from (used for) investing activities |        |         | 27,995  |   |        |         | (59,630 | ) |         |          | (26,101  | ) |         |         | (27,148 | ) |         |         | (84,884  | )
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|Net Increase (Decrease) in Cash and Cash Equivalents |                                                                              |                                                        | 72     |         |         |   | 813    |         |         |   | 16,909  |          |          |   |        |         |         |   | 17,794  |        
|                                                    
|                                                    
|                                                    
|                                                    
|Cash and Cash Equivalents, January 1                 |                                                                              |                                                        | 1,400  |         |         |   | 9,036  |         |         |   | 6,603   |          |          |   |        |         |         |   | 17,039  |        
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        
|Cash and Cash Equivalents, March 31                  |                                                                              | $                                                      | 1,472  |         |         | $ | 9,849  |         |         | $ | 23,512  |          |          | $ |        |         |         | $ | 34,833  |        
|                                                     |                                                                              |                                                        |        |         |         |   |        |         |         |   |         |          |          |   |         |         |         |   |         |        

36



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INDEPENDENT ACCOUNTANTS REPORT

To the Board of Directors of



We have reviewed the accompanying condensed consolidated
statements of financial position of MCN Energy Group Inc. and
subsidiaries (the Company) as of March 31, 2000
and 1999, the related condensed consolidated statements of
operations and retained earnings (deficit) for the three and
 twelve-month periods ended March 31, 2000 and 1999, and the
 condensed consolidated statements of cash flows for the
three-month periods ended March 31, 2000 and 1999. These
financial statements are the responsibility of the Companys
 management.

We conducted our review in accordance with standards established
by the American Institute of Certified Public Accountants. A
review of interim financial information consists principally of
applying analytical review procedures to the financial data and
of making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an
audit conducted in accordance with auditing standards generally
accepted in the United States of America, the objective of which
is the expression of an opinion regarding the financial
statements taken as a whole. Accordingly, we do not express such
an opinion.

Based on our review, we are not aware of any material
modifications that should be made to such condensed consolidated
financial statements for them to be in conformity with accounting
 principles generally accepted in the United States of America.

We have previously audited, in accordance with auditing standards
 generally accepted in the United States of America, the
consolidated statement of financial position of the Company as of
 December 31, 1999, and the related consolidated statements
of operations, financial position, and cash flows for the year
then ended (not presented herein); and in our report dated
March 21, 2000, we expressed an unqualified opinion on those
 consolidated financial statements and included an explanatory
paragraph relating to a change in accounting method as described
in Note 5 to those consolidated financial statements. In our
opinion, the information set forth in the accompanying condensed
consolidated statement of financial position as of
December 31, 1999 is fairly stated, in all material
respects, in relation to the consolidated statement of financial
position from which it has been derived.

DELOITTE & TOUCHE LLP

Detroit, Michigan



37



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##### Table of Contents








OTHER INFORMATION


EXHIBITS AND REPORTS ON FORM 8-K

(a)  Exhibits

| |  |         |      |             |  |                                                                                   
| |  | ------- | ---- | ----------- |  | ----------------------------------------------------------------------------------
| |  | Exhibit |      |            
| |  | Number  |      | Description
| |  |         |      |            
| |  |         | 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.
| |  |         | 15-1 |             |  | Letter re unaudited interim Financial information                                 
| |  |         | 27-1 |             |  | Financial Data Schedule                                                           

(b)  Reports on Form 8-K

None.

38



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##### Table of Contents








SIGNATURE


Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.



| |                      
| | ---------------------
| | MCN ENERGY GROUP INC.

Date: May 15, 2000

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

| |                              
| | -----------------------------
| | Gerard Kabzinski             
| | Vice President and Controller

39



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##### Table of Contents








| |              
| | -------------
| | EXHIBIT INDEX

| |  |         |      |             |  |                                                                                   
| |  | ------- | ---- | ----------- |  | ----------------------------------------------------------------------------------
| |  | Exhibit |      |            
| |  | Number  |      | Description
| |  |         |      |            
| |  |         | 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.
| |  |         | 15-1 |             |  | Letter re unaudited interim Financial information                                 
| |  |         | 27-1 |             |  | Financial Data Schedule