Annual Report (Form 10-K), fiscal year 1994




ITEM 2. PROPERTIES
MCN, through its principal subsidiaries, leases approximately 62,000 sq. feet of office space in Detroit and Grand Rapids under long-term leases.
GAS DISTRIBUTION
MichCon operates natural gas distribution, transmission and storage facilities in the state of Michigan. At December 31, 1994, MichCon's distribution system included 15,252 miles of distribution mains, 1,035,542
service lines and 1,157,567 active meters. MichCon owns 2,506 miles of transmission and production lines which deliver natural gas to the distribution districts and interconnect its storage fields with the sources of supply and the market areas. MichCon also owns properties relating to five underground storage fields with an aggregate storage capacity of approximately 130 Bcf. Additionally, MichCon owns district office buildings, service buildings and gas receiving and metering stations. MichCon occupies its principal office buildings, located in Detroit and Grand Rapids, Michigan under long-term leases. Portions of these buildings are subleased to affiliates and others.
Most of MichCon's properties are held in fee, by easement, or under lease agreements expiring at various dates to 2006, with renewal options extending beyond that date. The principal plants and properties of MichCon are held subject to the lien of MichCon's Indenture of Mortgage and Deed of Trust under which MichCon's First Mortgage Bonds are issued. Some existing properties are being fully utilized and new properties are being added to meet the requirements of expansion into new areas. MichCon's capital expenditures for 1994 totaled $145.4 million and could reach $250 million in 1995.
Citizens owns all of the properties used in the conduct of its utility business. Included in these properties is a gas distribution system, a two-story office building in downtown Adrian and a one-story service center.
DIVERSIFIED SERVICES
The Saginaw Bay partnership owns substantially all of the properties used in the conduct of its business, primarily a 126-mile transmission line and related lateral lines.
The Supply Development Group Inc. has interests in properties used for gas production, including compressor facilities and gathering lines. (See information below on Exploration and Production Activities for further details).
Genix owns certain properties, including land and building at their headquarters located in Dearborn, Michigan. Genix leases facilities and computer equipment located in Pennsylvania; North Carolina; Southgate, Michigan and London, England. Certain computer equipment is owned at all locations.
MCN is involved in joint ventures that own property associated with gas storage, cogeneration, gas gathering and processing, and real estate.
MCN's facilities are suitable and adequate for their intended use.
EXPLORATION AND PRODUCTION ACTIVITIES
Supply Development Group, Inc. (SDGI), a subsidiary of MCN, is involved in various gas and oil producing activities. The following data, together with the financial information detailed in Note 12 to the Consolidated Financial Statements, incorporated by reference in Item 8 of this report and the general data provided under the "Diversified Services: Gas Services -- Exploration & Production" section of Item 1 located on page 11, provide additional information regarding this activity. Reserves were estimated using contract sales prices. Future revenues (included in the standardized measure of discounted future net cash flows presented in Note 12 to the Consolidated Financial Statements) were increased for the higher fixed prices from swap contracts covering a portion of the volumes. Information on estimated gas and oil reserves was obtained by SDGI from the independent petroleum engineering consultants Ryder Scott Company and Miller and Lents, Ltd.
PRODUCTION
PRODUCTIVE WELLS AND ACREAGE
Gross wells include nine with multiple completions.
DRILLING ACTIVITY
PRESENT ACTIVITIES
DELIVERY COMMITMENTS
Once operations begin in late 1995, Cogen will provide to the Michigan Power Project up to 9 Bcf of gas, on an annual basis.
ITEM 3.

ITEM 3. LEGAL PROCEEDINGS
In addition to the Gas Distribution's regulatory proceedings and other matters described in Item 1, "Business", MCN is also involved in a number of lawsuits and administrative proceedings in the ordinary course of business with respect to taxes, environmental matters, personal injury, property damage claims and other matters.
On December 27, 1994, a class action complaint was filed against MichCon in Wayne County Circuit Court, Detroit, Michigan, by six residential customers of MichCon on behalf of themselves and others who purchased and installed high efficiency furnaces financed through one of MichCon's energy conservation programs approved by the MPSC. These furnaces were installed by independent licensed contractors. Plaintiffs allege, among other things, that MichCon failed to warn them that unsafe conditions could result from improper installation and venting of gas appliances, failed to take corrective action to remedy such conditions, and made false representations and/or omissions in connection therewith. Plaintiffs seek injunctive relief requiring MichCon to (a) warn its customers of unsafe conditions created by the installation of high efficiency furnaces, and (b) to reline all chimneys or install hot water heaters that vent to the outside. Plaintiffs also seek unspecified money damages among other things for diminution in the value of their homes, damage to homes, cost of repairs, exemplary damages, attorneys fees and costs. On February 3, 1995, immediately following a hearing on plaintiffs' motion to certify the class of customers, the Wayne County Circuit Court issued an order that denied plaintiffs' motion without prejudice. While plaintiffs could refile the motion, the judge stated on the record that before he would reconsider plaintiffs' motion, plaintiffs must be able to establish a more clearly defined plaintiff class and damages. Management believes plaintiffs' allegations are without merit and intends to vigorously defend this action.
The management of MCN believes that the resolution of these matters will not have a material adverse effect on the financial statements of MCN.
ITEM 4.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to all executive officers of MCN, as of February 21, 1995, is set forth below. Such officers are appointed by the Board of Directors for terms expiring at the next annual meeting of shareholders scheduled to be held on April 27, 1995.
PART II
ITEM 5.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MCN Common Stock is traded on the New York Stock Exchange. On February 21, 1995 there were 24,705 holders of record of MCN Common Stock. Information regarding the market price of MCN Common Stock and related security holder matters is incorporated by reference herein from the section entitled "Supplementary Financial Information" in MCN's 1994 Annual Report to Shareholders, pages 58 and 59.
ITEM 6.

ITEM 6. SELECTED FINANCIAL DATA
Information required pursuant to this item is incorporated by reference herein from the section entitled "Supplementary Financial Information" in MCN's 1994 Annual Report to Shareholders, pages 58 and 59.
ITEM 7.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information required pursuant to this item is incorporated by reference herein from the section entitled "Management's Discussion and Analysis" in MCN's 1994 Annual Report to Shareholders, pages 32 through 39.
ITEM 8.


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required pursuant to this item is incorporated by reference herein from the following sections of MCN's 1994 Annual Report to Shareholders. The consolidated statement of income, cash flows and capitalization are for each of the years ended December 31, 1994, 1993 and 1992 and the consolidated statement of financial position is as of December 31, 1994 and 1993.
Consolidated Statement of Income, page 40
Consolidated Statement of Financial Position, page 41
Consolidated Statement of Capitalization, page 42
Consolidated Statement of Cash Flows, page 43
Summary of Accounting Policies, page 44
Notes to Consolidated Financial Statements, pages 45 through 55
Independent Auditors' Report, page 56; and
Supplementary Financial Information, pages 58 and 59
ITEM 9.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10.



ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information set forth in the section entitled "Proposal 1-Election of Directors" in MCN's March 1995 definitive Proxy Statement is incorporated by reference herein.
Information concerning the executive officers of MCN is set forth in the section entitled "Executive Officers of the Registrant" on page 18 in Part I of this Report.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
All reports concerning ownership of MCN equity securities required to be filed by MCN's directors and executive officers pursuant to Section 16 of the Securities Exchange Act of 1934, as amended, were filed on a timely basis with the Securities and Exchange Commission.
ITEM 11.

ITEM 11. EXECUTIVE COMPENSATION
The information set forth in the section entitled "Compensation of Directors and Executive Officers" in MCN's March 1995 definitive Proxy Statement is incorporated by reference herein.
ITEM 12.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information set forth in the section entitled "Beneficial Security Ownership of Directors, Nominees and Executive Officers" in MCN's March 1995 definitive Proxy Statement is incorporated by reference herein.
ITEM 13.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information set forth in the section entitled "Other Compensation Matters" in MCN's March 1995 definitive Proxy Statement is incorporated by reference herein.
PART IV
ITEM 14.

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULE, AND REPORTS ON FORM 8-K
(A) LIST OF DOCUMENTS FILED AS PART OF THE REPORT:
1. For a list of financial statements incorporated by reference, see the section entitled "Financial Statements and Supplementary Data", on page 19 in Part II, Item 8 of this Report.
2. The Financial Statement Schedule for each of the three years in the period ended December 31, 1994, unless otherwise noted, is included herein in response to Part II, Item 8:
Independent Auditor's Report
SCHEDULE II -- Valuation and Qualifying Accounts
Schedules other than that referred to above are omitted as not applicable or not required, or the required information is shown in the financial statements or notes thereto.
INDEPENDENT AUDITORS' REPORT
MCN Corporation:
We have audited the consolidated financial statements of MCN Corporation and subsidiaries as of December 31, 1994 and 1993, and for each of the three years in the period ended December 31, 1994, and have issued our report thereon dated February 6, 1995; such consolidated financial statements and report are included in your 1994 Annual Report to Shareholders and are incorporated therein by reference. Our audits also included the consolidated financial statement schedule of MCN Corporation and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
Deloitte & Touche LLP Detroit, Michigan February 6, 1995
SCHEDULE II
MCN CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS (THOUSANDS OF DOLLARS)
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NOTES:
(1) During 1994, MCN established a reserve for the expected loss relating to the sale of a partnership interest in a gas marketing joint venture. The sale is anticipated to take place during the first half of 1995.
(2) Reference is made to Note 5b to the Consolidated Financial Statements in the 1994 Annual Report to Shareholders of MCN Corporation, page 47. During the year ended December 31, 1993, $6,575,000 was transferred from Deferred Credits and Other Liabilities -- Other to Current Liabilities -- Other. Similarly, $2,000,000 was transferred during the year ended December 31, 1992. Actual expenditures deducted against the reserve in 1993 and 1992 were $2,073,000 and $781,000, respectively.
3. Exhibits, Including Those Incorporated By Reference.
- --------------- * Indicates document filed herewith.
References are to MCN (File No. 1-10070) for documents incorporate by reference.
(B) REPORTS ON FORM 8-K:
MCN filed a report on Form 8-K dated October 21, 1994, under Item 5, with respect to the reporting of its third quarter results of operations.
MCN filed a report on Form 8-K dated October 26, 1994, under Item 5, with respect to the offering by MCN Michigan Limited Partnership (MCN Michigan) of its 9 3/8% Cumulative Preferred Securities, Series A, liquidation preference $25 per Preferred Security (Preferred Securities). MCN is the general partner of MCN Michigan. A Form of Purchase Agreement was filed as an Exhibit thereto.
MCN filed an additional report on Form 8-K dated October 26, 1994, under Item 5, with respect to the offering of the Preferred Securities by MCN Michigan. The following documents were filed as Exhibits thereto:
- Amended and Restated Limited Partnership Agreement of MCN Michigan Limited Partnership.
- Action by the General Partner of MCN Michigan Limited Partnership creating the 9 3/8% Cumulative Preferred Securities, Series A, dated October 26, 1994.
- Form of Certificate Evidencing Preferred Partner Interest of MCN Michigan Limited Partnership.
- MCN Corporation Board of Directors' Pricing Committee Resolution establishing the price, terms and conditions of the Debt Securities.
- Terms and Conditions of Series A Subordinated Deferrable Interest Debt Securities.
- Form of MCN Corporation Series A Subordinated Deferrable Interest Debt Security for $100,000,000.
- Form of MCN Corporation Series A Subordinated Deferrable Interest Debt Security for $1,100,000.
- Form of the Series A Subordinated Deferrable Interest Debt Security to be issued in the event that MCN Michigan ceases to be the sole holder.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.
MCN CORPORATION
-------------------------------------- (Registrant)
By: /s/ Patrick Zurlinden
------------------------------------ Patrick Zurlinden Vice President, Controller and Chief Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the date indicated.
EXHIBIT INDEX
- --------------- * Indicates document filed herewith.
References are to MCN (File No. 1-10070) for documents incorporate by reference.