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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000

[ ] 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	Registrant; State of Incorporation; Address; and Telephone Number	IRS Employer Identification No.




1-9513	CMS ENERGY CORPORATION (A Michigan Corporation) Fairlane Plaza South, Suite 1100 330 Town Center Drive, Dearborn, Michigan 48126 (313)436-9200	38-2726431




1-5611	CONSUMERS ENERGY COMPANY (A Michigan Corporation) 212 West Michigan Avenue, Jackson, Michigan 49201 (517)788-0550	38-0442310




1-2921	PANHANDLE EASTERN PIPE LINE COMPANY (A Delaware Corporation) 5444 Westheimer Road, P.O. Box 4967, Houston, Texas 77210-4967 (713)989-7000	44-0382470

Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No

Panhandle Eastern Pipe Line Company meets the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q and is therefore filing this Form 10-Q with the reduced disclosure format. In accordance with Instruction H, Part I, Item 2 has been reduced and Part II, Items 2, 3 and 4 have been omitted.


Number of shares outstanding of each of the issuer’s classes of common stock at July 31, 2000:




CMS Energy Corporation:




	CMS Energy Common Stock, $.01 par value	110,020,574




	CMS Energy Class G Common Stock, no par value	0




Consumers Energy Company, $10 par value, privately held by CMS Energy		84,108,789




Panhandle Eastern Pipe Line Company, no par value,




	indirectly privately held by CMS Energy	1,000

CMS Energy Corporation
and
Consumers Energy Company
and
Panhandle Eastern Pipe Line Company

Quarterly reports on Form 10-Q to the Securities and Exchange Commission
for the Quarter Ended June 30, 2000

This combined Form 10-Q is separately filed by each of CMS Energy Corporation, Consumers Energy Company and Panhandle Eastern Pipe Line Company. Information contained herein relating to each individual registrant is filed by such registrant on its own behalf. Accordingly, except for their respective subsidiaries, Consumers Energy Company and Panhandle Eastern Pipe Line Company make no representation as to information relating to any other companies affiliated with CMS Energy Corporation.

TABLE OF CONTENTS

Page


Glossary		3




PART I:




CMS Energy Corporation




	Management’s Discussion and Analysis	CMS-1




	Consolidated Statements of Income	CMS-16




	Consolidated Statements of Cash Flows	CMS-18




	Consolidated Balance Sheets	CMS-20




	Consolidated Statements of Common Stockholders’ Equity	CMS-22




	Condensed Notes to Consolidated Financial Statements	CMS-23




	Report of Independent Public Accountants	CMS-40




Consumers Energy Company




	Management’s Discussion and Analysis	CE-1




	Consolidated Statements of Income	CE-10




	Consolidated Statements of Cash Flows	CE-11




	Consolidated Balance Sheets	CE-12




	Consolidated Statements of Common Stockholder’s Equity	CE-14




	Condensed Notes to Consolidated Financial Statements	CE-15




	Report of Independent Public Accountants	CE-26




Panhandle Eastern Pipe Line Company




	Management’s Discussion and Analysis	PE-1




	Consolidated Statements of Income	PE-6




	Consolidated Statements of Cash Flows	PE-7




	Consolidated Balance Sheets	PE-8




	Consolidated Statements of Common Stockholder’s Equity	PE-10




	Condensed Notes to Consolidated Financial Statements	PE-11




	Report of Independent Public Accountants	PE-17




Quantitative and Qualitative Disclosures about Market Risk		CO-1




PART II:




	Item 1. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information	CO-1 CO-2 CO-3




	Item 6. Exhibits and Reports on Form 8-K	CO-3




Signatures		CO-4

GLOSSARY

Certain terms used in the text and financial statements are defined below.


ABATE		Association of Businesses Advocating Tariff Equity




ALJ		Administrative Law Judge




Alliance		Alliance Regional Transmission Organization




Articles		Articles of Incorporation




Attorney General		Michigan Attorney General




bcf		Billion cubic feet




Big Rock		Big Rock Point nuclear power plant, owned by Consumers




Board of Directors		Board of Directors of CMS Energy




Btu		British thermal unit




Class G Common Stock		One of two classes of common stock of CMS Energy, no par value, which reflects the separate performance of the Consumers Gas Group, redeemed in October 1999.




Clean Air Act		Federal Clean Air Act, as amended




CMS Electric and Gas		CMS Electric and Gas Company, a subsidiary of Enterprises




CMS Energy		CMS Energy Corporation, the parent of Consumers and Enterprises




CMS Energy Common Stock		One of two classes of common stock of CMS Energy, par value $.01 per share




CMS Gas Transmission		CMS Gas Transmission Company, a subsidiary of Enterprises




CMS Generation		CMS Generation Co., a subsidiary of Enterprises




CMS Holdings		CMS Midland Holdings Company, a subsidiary of Consumers




CMS Midland		CMS Midland Inc., a subsidiary of Consumers




CMS MST		CMS Marketing, Services and Trading Company, a subsidiary of Enterprises




CMS Oil and Gas		CMS Oil and Gas Company, a subsidiary of Enterprises




CMS Panhandle Holding		CMS Panhandle Holding Company, a subsidiary of CMS Gas Transmission




Common Stock		All classes of Common Stock of CMS Energy and each of its subsidiaries, or any of them individually, at the time of an award or grant under the Performance Incentive Stock Plan




Consumers		Consumers Energy Company, a subsidiary of CMS Energy




Consumers Gas Group		The gas distribution, storage and transportation businesses currently conducted by Consumers and Michigan Gas Storage




Court of Appeals		Michigan Court of Appeals




Customer Choice and Electricity Reliability Act		Michigan statute enacted in June 2000 that allows all retail customers choice of alternative electric suppliers no later than January 1, 2002, provides for full recovery of net stranded costs and implementation costs, establishes a 5 percent reduction in residential rates, establishes rate freeze and rate cap, and allows for securitization




Detroit Edison		The Detroit Edison Company, a non-affiliated company




DOE		U.S. Department of Energy




Dow		The Dow Chemical Company, a non-affiliated company




Duke Energy		Duke Energy Corporation, a non-affiliated company






EITF		Emerging Issues Task Force




Enterprises		CMS Enterprises Company, a subsidiary of CMS Energy




EPA		Environmental Protection Agency




EPS		Earnings per share




FASB		Financial Accounting Standards Board




FERC		Federal Energy Regulatory Commission




FMLP		First Midland Limited Partnership, a partnership which holds a 75.5% lessor interest in the Midland Cogeneration Venture facility




FTC		Federal Trade Commission




GCR		Gas cost recovery




GTNs		CMS Energy General Term Notes(R), $250 million Series A, $125 million Series B, $150 million Series C, $200 million Series D and $400 million Series E




Huron		Huron Hydrocarbons, Inc., a subsidiary of Consumers




kWh		Kilowatt-hour




Loy Yang		The 2,000 MW brown coal fueled Loy Yang A power plant and an associated coal mine in Victoria, Australia, in which CMS Generation holds a 50 percent ownership interest




LNG		Liquefied natural gas




Ludington		Ludington pumped storage plant, jointly owned by Consumers and Detroit Edison




mcf		Thousand cubic feet




MCV Facility		A natural gas-fueled, combined-cycle cogeneration facility operated by the MCV Partnership




MCV Partnership		Midland Cogeneration Venture Limited Partnership in which Consumers has a 49 percent interest through CMS Midland




MD&A		Management’s Discussion and Analysis




MEPCC		Michigan Electric Power Coordination Center




Michigan Gas Storage		Michigan Gas Storage Company, a subsidiary of Consumers




Michigan State Utility Workers Council		The executive board and negotiating body for local chapters of the Union




MMBtu		Million British thermal unit




MPSC		Michigan Public Service Commission




MW		Megawatts




NEIL		Nuclear Electric Insurance Limited, an industry mutual insurance company owned by member utility companies




NOx		Nitrogen Oxide




NRC		Nuclear Regulatory Commission




NYMEX		New York Mercantile Exchange




Outstanding Shares		Outstanding shares of Class G Common Stock




Palisades		Palisades nuclear power plant, owned by Consumers






Panhandle		Panhandle Eastern Pipe Line Company, including its subsidiaries Trunkline, Pan Gas Storage, Panhandle Storage, and Trunkline LNG. Panhandle is a wholly owned subsidiary of CMS Gas Transmission




Panhandle Eastern Pipe Line		Panhandle Eastern Pipe Line Company, a wholly owned subsidiary of CMS Gas Transmission




Panhandle Storage		CMS Panhandle Storage Company, a subsidiary of Panhandle Eastern Pipe Line Company




PCBs		Poly chlorinated biphenyls




PECO		PECO Energy Company, a non-affiliated company




PPA		The Power Purchase Agreement between Consumers and the MCV Partnership with a 35-year term commencing in March 1990




PSCR		Power supply cost recovery




RTO		Regional Transmission Organization




Sea Robin		Sea Robin Pipeline Company




SEC		Securities and Exchange Commission




Securitization		A financing authorized by statute in which the statutorily assured flow of revenues from a portion of the rates charged by a utility to its customers is set aside and pledged as security for the repayment of rate reduction bonds issued by a special purpose entity affiliated with such utility.




Senior Credit Facility		$1 billion one-year revolving credit facility maturing in June 2001




SFAS		Statement of Financial Accounting Standards




SOP		Statement of position




Stranded Costs		Costs incurred by utilities in order to serve their customers in a regulated monopoly environment, but which may not be recoverable in a competitive environment because of customers leaving their systems and ceasing to pay for their costs. These costs could include owned and purchased generation and regulatory assets.




Superfund		Comprehensive Environmental Response, Compensation and Liability Act




TBtu		Trillion british thermal unit




Transition Costs		Stranded Costs, as defined, plus the costs incurred in the transition to competition.




Trunkline		Trunkline Gas Company, a subsidiary of Panhandle Eastern Pipe Line Company




Trunkline LNG		Trunkline LNG Company, a subsidiary of Panhandle Eastern Pipe Line Company




Trust Preferred Securities		Securities representing an undivided beneficial interest in the assets of statutory business trusts, which interests have a preference with respect to certain trust distributions over the interests of either CMS Energy or Consumers, as applicable, as owner of the common beneficial interests of the trusts




Union		Utility Workers of America, AFL-CIO

CMS Energy Corporation

Management’s Discussion and Analysis

CMS Energy is the parent holding company of Consumers and Enterprises. Consumers is a combination electric and gas utility company serving the Lower Peninsula of Michigan. Enterprises, through subsidiaries, is engaged in several domestic and international diversified energy businesses including: natural gas transmission, storage and processing; independent power production; oil and gas exploration and production; energy marketing, services and trading; and international energy distribution. On March 29, 1999, CMS Energy completed the acquisition of Panhandle, as further discussed in the Capital Resources and Liquidity section of this MD&A and Note 1. Panhandle is primarily engaged in the interstate transportation and storage of natural gas.

The MD&A of this Form 10-Q should be read along with the MD&A and other parts of CMS Energy’s 1999 Form 10-K. This MD&A also refers to, and in some sections specifically incorporates by reference, CMS Energy’s Condensed Notes to Consolidated Financial Statements and should be read in conjunction with such Statements and Notes. This report and other written and oral statements made by CMS Energy from time to time contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” and “plans,” and variations of such words and similar expressions, are intended to identify forward-looking statements that involve risk and uncertainty. These forward-looking statements are subject to various factors which could cause CMS Energy’s actual results to differ materially from those anticipated in such statements. CMS Energy disclaims any obligation to update or revise forward-looking statements, whether from new information, future events or otherwise. CMS Energy details certain risk factors, uncertainties and assumptions in this MD&A and particularly in the section entitled “CMS Energy, Consumers and Panhandle Forward-Looking Statements Cautionary Factors” in CMS Energy’s 1999 Form 10-K Item 1 and periodically in various public filings it makes with the SEC. This discussion of potential risks and uncertainties is by no means complete but is designed to highlight important factors that may impact CMS Energy’s outlook. This report also describes material contingencies in the Condensed Notes to Consolidated Financial Statements and readers are encouraged to read such Notes.

RESULTS OF OPERATIONS

CMS Energy Consolidated Earnings


			In Millions, Except Per Share Amounts

Three months ended June 30,			2000		1999		Change

Consolidated Net Income			$	81	$	75	$	6




Net Income Attributable to Common Stocks:




	CMS Energy			81		74		7




	Class G			—		1		(1	)




Earnings Per Average Common Share:




	CMS Energy




		Basic		.73		.68		.05




		Diluted		.72		.67		.05




	Class G




		Basic and Diluted		—		.10		(.10	)

CMS-1


			In Millions, Except Per Share Amounts

Six months ended June 30,			2000		1999		Change

Consolidated Net Income			$	161	$	173	$	(12	)




Net Income Attributable to Common Stocks:




	CMS Energy			161		162		(1	)




	Class G			—		11		(11	)




Earnings Per Average Common Share:




	CMS Energy




		Basic		1.44		1.50		(.06	)




		Diluted		1.42		1.48		(.06	)




	Class G




		Basic and Diluted		—		1.28		(1.28	)

The increase in consolidated net income for the second quarter 2000 over the comparable period in 1999 resulted from increased earnings from CMS Energy’s diversified energy businesses, including the independent power production business, the natural gas transmission, storage and processing business, the oil and gas exploration and production business, the marketing, services and trading business and the international energy distribution business, as well as gains on the sale of non-strategic assets. Partially offsetting these increases were decreased earnings from the electric and gas utilities, as well as higher interest expense principally related to the Panhandle acquisition. Second quarter 2000 results include approximately $50 million or $.43 per diluted share, of after-tax gains from major asset sales. CMS Energy’s recurring asset optimization program is expected to generate $50 million of pre-tax gains, or approximately $.30 per diluted share, from asset sales annually. As a result, approximately $.13 per diluted share of after-tax gains exceeds the amount CMS Energy expects to sustain in future years.

The decrease in consolidated net income for the six months ended June 30, 2000 over the comparable period in 1999 resulted from decreased earnings from the electric and gas utilities, coupled with higher interest expense principally related to the Panhandle acquisition. Partially offsetting these decreases were increased earnings from CMS Energy’s diversified energy businesses, including the natural gas transmission, storage and processing business primarily reflecting ownership of Panhandle for the entire first six months of 2000 versus only the second quarter of 1999, the independent power production business, the oil and gas exploration and production business, the international energy distribution business, and the marketing, services and trading business, as well as gains on the sale of non-strategic assets. The six months ended June 30, 2000 results include approximately $50 million, or $.43 per diluted share of after-tax gains from major asset sales. Approximately $.13 per diluted share of after-tax gains exceeds the amount CMS Energy expects to sustain in future years as part of its recurring asset optimization program.

For further information, see the individual results of operations for each CMS Energy business segment in this MD&A.

CMS-2

Consumers’ Electric Utility Results of Operations

Electric Pretax Operating Income: For the three months ended June 30, 2000, electric pretax operating income decreased $13 million from the comparable period in 1999. The earnings decrease reflects increased power costs not totally recoverable from customers, the 5 percent residential customer rate reduction resulting from the Customer Choice and Electricity Reliability Act, and increased operating expenses. For the six months ended June 30, 2000, electric pretax operating income decreased $32 million from the comparable period in 1999. The earnings decrease also reflects the increased cost of purchased power and the impact of the electric rate reduction partially offset by increased electric sales to customers. Due to changes in regulation, since 1998 differences in power supply costs now impact Consumers’ earnings. In the past, such cost changes did not impact electric pretax operating income because Consumers passed the cost of electric power on to electric customers. During the current year, Consumers needed additional purchased electric power to meet customer requirements due to scheduled and unscheduled outages at Consumers’ internal generators. The following table quantifies these impacts on pretax operating income:


				In Millions

	Three Months			Six Months
	Ended June 30			Ended June 30
Change Compared to Prior Year	2000 vs 1999			2000 vs 1999

Electric deliveries	$	4		$	12




Power supply costs and related revenue		(3	)		(25	)




Rate decrease		(5	)		(5	)




Non-commodity revenue		(2	)		(5	)




Operation and maintenance expense		(8	)		(8	)




General taxes and depreciation expense		1			(1	)

Total change	$	(13	)	$	(32	)

Electric Deliveries: Electric deliveries were 10.1 billion kWh for the three months ended June 30, 2000, essentially unchanged from the second quarter of 1999. Electric deliveries were 19.8 billion kWh for the six months ended June 30, 2000, a slight decrease from the corresponding 1999 period. Total electric deliveries decreased due to lower intersystem sales, less usage by industrial customers, and lower residential space heating.

Power Supply Costs:


			In Millions

June 30	2000		1999		Change

Three months ended	$	294	$	293	$	1




Six months ended		594		571		23

Power supply costs were essentially unchanged for the three months ended June 30, 2000 from the comparable period in 1999 but increased for the six month period, primarily due to higher interchange power costs. Consumers had to purchase more external power because internal generation decreased due to scheduled and unscheduled outages.

CMS-3

Consumers’ Gas Utility Results of Operations

Gas Pretax Operating Income:

Gas pretax operating income decreased in the three months ended June 30, 2000 by $44 million. The earnings decrease primarily reflects sharply higher gas prices in 2000 and the establishment of a $45 million regulatory obligation related to the higher prices above the frozen gas customer rate. These decreases are partially offset by higher gas deliveries due to cooler temperatures in the three months ended June 30, 2000. Gas pretax operating income decreased in the six months ended June 30, 2000 by $59 million. The earnings decrease primarily reflects decreased gas deliveries in the six months ended June 30, 2000 due to warmer temperatures during the heating season and the higher gas prices purchased for the next heating season as described for the three month period. Due to a temporary change in regulation, differences in gas costs directly impact Consumers’ earnings. This change in regulation relates to the gas industry restructuring initiatives, which provide Consumers the opportunity to temporarily benefit or lose from changes in commodity gas prices. See Note 2, Uncertainties, “Consumers’ Gas Utility Matters — Gas Restructuring”, for more detailed information on this matter. The following table quantifies these impacts on Pretax Operating Income.


				In Millions

	Three Months			Six Months
	Ended June 30			Ended June 30
Change Compared to Prior Year	2000 vs 1999			2000 vs 1999

Gas deliveries	$	4		$	(6	)




Gas commodity costs and related revenue		(50	)		(61	)




Gas wholesale and retail services		2			4




Operation and maintenance expense		1			3




General taxes and depreciation expense		(1	)		1

Total change	$	(44	)	$	(59	)

Gas Deliveries: Gas system deliveries for the three months ended June 30, 2000, including miscellaneous transportation totaled 66 bcf, an increase of 4 bcf or 6 percent compared with 1999. The increased deliveries reflect cooler temperatures during the second quarter of 2000. Gas system deliveries for the six months ended June 30, 2000, including miscellaneous transportation totaled 227 bcf, a decrease of 1 bcf or .5 percent compared with 1999.

Cost of Gas Sold:


					In Millions

June 30	2000		1999		Change

Three months ended	$	95	$	78	$	17




Six months ended	$	390	$	384	$	6

The cost of gas sold increased for the three months ended June 30, 2000 due to higher gas prices and increased gas deliveries due to cooler than normal temperature. Higher gas prices also impacted the cost of gas sold for the six months ended June 30, 2000. These higher gas costs were partially offset by decreased sales from warmer than normal temperatures during the first quarter of 2000.

CMS-4

Natural Gas Transmission, Storage and Processing Results of Operations

Pretax Operating Income: Pretax operating income for the three months ended June 30, 2000 increased $4 million (9 percent) from the comparable period in 1999. The increase reflects increased earnings from international and domestic operations, including Sea Robin, which was acquired in March 2000, partially offset by decreased earnings from Panhandle. Pretax operating income for the six months ended June 30, 2000 increased $78 million (170 percent) from the comparable period in 1999. The increase reflects earnings from Panhandle and Sea Robin, which CMS Energy acquired in March 1999 and March 2000, respectively, as well as increased earnings from other international and domestic operations and lower operating expenses.

Independent Power Production Results of Operations

Pretax Operating Income: Pretax operating income for the three months ended June 30, 2000 increased $29 million (74 percent) from the comparable period in 1999. The increase primarily reflects the earnings benefits from a new facility in Asia, the restructuring of a power supply contract and increased earnings from international and domestic plant operations. Partially offsetting these increases were higher operating expenses and a scheduled reduction in operating fees. Pretax operating income for the six months ended June 30, 2000 increased $19 million (29 percent) from the comparable period in 1999. The increase is attributable to earnings from the new Asian facility, the restructuring of a power supply contract and increased earnings from international plant operations. Partially offsetting these increases were decreased earnings from domestic plants and the MCV Facility, a scheduled reduction in operating fees and higher operating expenses.

Oil and Gas Exploration and Production Results of Operations

Pretax Operating Income: Pretax operating income for the three months ended June 30, 2000 increased $1 million (20 percent) from the comparable period in 1999 as a result of higher realized commodity prices and increased production from West Texas and Powder River properties, partially offset by increased general and administrative expenses and reduced earnings from northern Michigan oil and gas properties which were sold in March 2000. Pretax operating income for the six months ended June 30, 2000 increased $3 million (43 percent) from the comparable period in 1999 as a result of higher realized commodity prices and increased production from West Texas and Powder River properties, partially offset by lower northern Michigan production as a result of the aforementioned sale in March 2000 and higher operating, general and administrative, and exploration costs.

Marketing, Services and Trading Results of Operations

Pretax Operating Income: Pretax operating earnings for the three months ended June 30, 2000 increased $4 million from the comparable period in 1999. The increase primarily reflects increased earnings from wholesale gas activities, including mark-to-market adjustments on trading contracts, which benefited from natural gas market price increases, partially offset by reduced margins from wholesale electric activities. Pretax operating income for the six months ended June 30, 2000 increased $4 million from the comparable period in 1999 as a result of increased wholesale gas earnings due to increases in natural gas market prices, increased LNG sales and earnings benefits from an energy management services acquisition made in late 1999, partially offset by reduced margins from wholesale electric activities.

CMS-5

International Energy Distribution Results of Operations

Pretax Operating Income: Pretax operating income for the three months ended June 30, 2000 increased $2 million (100 percent) from the comparable period in 1999. The increase primarily reflects earnings from new investments in a Brazilian electric distribution utility as well as lower operating expenses. Pretax operating income for the six months ended June 30, 2000 increased $14 million (350 percent) from the comparable period in 1999. The increase is the result of increased earnings from new investments in a Brazilian electric distribution utility, increased earnings from Argentine and Venezuelan electric distribution utilities, and lower operating expenses.

Market Risk Information

CMS Energy is exposed to market risks including, but not limited to, changes in interest rates, currency exchange rates, and certain commodity and equity security prices. Management employs established policies and procedures to manage its risks associated with these market fluctuations, including the use of various derivative instruments such as futures, swaps, options and forward contracts. Management believes that any losses incurred on derivative instruments used to hedge risk would be offset by an opposite movement of the value of the hedged item.

In accordance with SEC disclosure requirements, CMS Energy has performed sensitivity analyses to assess the potential loss in fair value, cash flows and earnings based upon hypothetical 10 percent increases and decreases in market exposures. Management does not believe that sensitivity analyses alone provide an accurate or reliable method for monitoring and controlling risks. Therefore, CMS Energy and its subsidiaries rely on the experience and judgment of senior management and traders to revise strategies and adjust positions as they deem necessary. Losses in excess of the amounts determined in the sensitivity analyses could occur if market rates or prices exceed the 10 percent shift used for the analyses.

Commodity Price Risk: Management uses commodity futures contracts, options and swaps (which require a net cash payment for the difference between a fixed and variable price) to manage commodity price risk. The prices of energy commodities, such as gas, oil, electric and natural gas liquids, fluctuate due to changes in the supply of and demand for those commodities. To reduce price risk caused by these market fluctuations, CMS Energy hedges certain inventory and purchases and sales contracts. A hypothetical 10 percent adverse shift in quoted commodity prices in the near term would not have had a material impact on CMS Energy’s consolidated financial position, results of operations or cash flows as of June 30, 2000. The analysis assumes that the maximum exposure associated with purchased options is limited to prices paid. The analysis also does not quantify short-term exposure to hypothetically adverse price fluctuations in inventories.

Interest Rate Risk: Management uses a combination of fixed-rate and variable-rate debt to reduce interest rate exposure. Interest rate swaps and rate locks may be used to adjust exposure when deemed appropriate, based upon market conditions. These strategies attempt to provide and maintain the lowest cost of capital. The carrying amount of long-term debt was $7.2 billion at June 30, 2000 with a fair value of $6.7 billion. The fair value of CMS Energy’s interest rate swaps at June 30, 2000, with a notional amount of $1.9 billion, was $1 million, representing the amount CMS Energy would pay upon settlement. A hypothetical 10 percent adverse shift in interest rates in the near term would not have a material effect on CMS Energy’s consolidated financial position, results of operations or cash flows as of June 30, 2000.

CMS-6

Currency Exchange Risk: Management uses forward exchange and option contracts to hedge certain investments in foreign operations. A hypothetical 10 percent adverse shift in currency exchange rates would not have a material effect on CMS Energy’s consolidated financial position or results of operations as of June 30, 2000, but would result in a net cash settlement of approximately $21 million. The estimated fair value of the foreign exchange and option contracts at June 30, 2000 was $18 million, representing the amount CMS Energy would pay upon settlement.

Equity Security Price Risk: CMS Energy and certain of its subsidiaries have equity investments in companies in which they hold less than a 20 percent interest. A hypothetical 10 percent adverse shift in equity security prices would not have a material effect on CMS Energy’s consolidated financial position, results of operations or cash flows as of June 30, 2000.

For a discussion of accounting policies related to derivative transactions, see Note 5.

CAPITAL RESOURCES AND LIQUIDITY

Cash Position, Investing and Financing

CMS Energy’s primary ongoing source of cash is dividends and distributions from subsidiaries. During the first six months of 2000, Consumers paid $109 million in common dividends and Enterprises paid $454 million in common dividends and distributions to CMS Energy. In July 2000, Consumers declared a $17 million dividend payable in August 2000 to CMS Energy. CMS Energy’s consolidated cash requirements are met by its operating and financing activities.

Operating Activities: CMS Energy’s consolidated net cash provided by operating activities is derived mainly from the processing, storage, transportation and sale of natural gas; the generation, transmission, distribution and sale of electricity; and the sale of oil. Consolidated cash from operations totaled $183 million and $440 million for the first six months of 2000 and 1999, respectively. The $257 million decrease resulted primarily from a decrease in earnings, excluding gains from asset sales, the timing of cash receipts and payments related to working capital items, a decrease in deferred taxes, and an increase in undistributed equity earnings of unconsolidated subsidiaries. CMS Energy uses its cash derived from operating activities primarily to maintain and expand its international and domestic businesses, to maintain and expand electric and gas systems of Consumers, to pay interest on and retire portions of its long-term debt, and to pay dividends.

Investing Activities: CMS Energy’s consolidated net cash used in investing activities totaled $37 million and $2.441 billion for the first six months of 2000 and 1999, respectively. The decrease of $2.404 billion primarily reflects the acquisition of Panhandle in March 1999 for $1.9 billion and a $558 million increase in proceeds from the sales of assets. CMS Energy’s expenditures (excluding acquisitions) during the first six months of 2000 for its utility and diversified energy businesses were $243 million and $279 million, respectively, compared to $197 million and $357 million, respectively, during the comparable period in 1999.

CMS-7

Financing Activities: CMS Energy’s net cash used in financing activities totaled $38 million for the first six months of 2000, while net cash provided by financing activities totaled $2.113 billion for the first six months of 1999. Net cash provided in 1999 primarily related to funding the approximately $1.9 billion Panhandle acquisition in March 1999. The decrease of $2.151 billion in net cash provided by financing activities resulted from a decrease of $2.119 billion in the issuance of new securities (see table below for securities issued in first six months of 2000), an increase in the retirement of bonds and other long-term debt ($186 million), and an increase in the repurchase of common stock, net of common stock issuances ($177 million), partially offset by decreases in the retirement of notes payable ($138 million) and preferred stock ($194 million).


												In Millions

							Distribution/			Principal
	Month Issued			Maturity			Interest Rate			Amount		Use of Proceeds

CMS Energy




GTNs Series E		(1	)		(1	)		8.8	%(1)	$	62		General corporate purposes

										$	62




Panhandle




Senior Notes		March			2010			8.25	%	$	100		To fund acquisition




													of Sea Robin and general




													corporate purposes

										$	100

Total										$	162

(1)

GTNs are issued from time to time with varying maturity dates. The rate shown herein is a weighted average interest rate.

For the first six months of 2000, CMS Energy declared and paid $82 million in cash dividends to holders of CMS Energy Common Stock. In July 2000, the Board of Directors declared a quarterly dividend of $.365 per share on CMS Energy Common Stock, payable in August 2000.

Other Investing and Financing Matters: At June 30, 2000, the book value per share of CMS Energy Common Stock was $21.36.

At August 1, 2000, CMS Energy had an aggregate $1.6 billion in securities registered for future issuance.

CMS Energy’s Senior Credit Facility consists of a $1 billion one-year revolving credit facility maturing in June 2001. Additionally, CMS Energy has unsecured lines of credit as anticipated sources of funds to finance working capital requirements and to pay for capital expenditures between long-term financings. At June 30, 2000, the total amount available under the Senior Credit Facility was $270 million, and under the unsecured lines of credit was $24 million. For detailed information, see Note 3, incorporated by reference herein.

CMS-8

Consumers has credit facilities, lines of credit and a trade receivable sale program in place as anticipated sources of funds to fulfill its currently expected capital expenditures. For detailed information about these sources of funds, see Note 3, incorporated by reference herein.

CMS Energy has identified for possible sale certain assets that are expected to contribute little or no earnings benefit in the short to medium term. From December 1999 through August 1, 2000, CMS Energy had sold or had reached agreements to sell $664 million of these assets, including a partial interest in its Northern Header gathering system, all of its ownership interest in a Brazilian distribution system, all of its northern Michigan oil and gas properties, its ownership interest in the Lakewood Cogeneration plant located in Lakewood, New Jersey, and all of its ownership interest in certain oil reserves located in Ecuador. These asset sales have resulted in total cash proceeds and associated reduction of consolidated project debt of approximately $850 million. CMS Energy plans to continue to sell additional assets resulting in cash proceeds and associated reduction of consolidated project debt, as more fully discussed in the Outlook-Financial Plan section below.

In addition, in February 2000, CMS Energy announced its intention to sell its 50 percent interest in Loy Yang. The amount CMS Energy ultimately realizes from the sale of Loy Yang could differ materially from the approximately $500 million investment amount currently reflected as an asset on the balance sheet.

Capital Expenditures

CMS Energy estimates that capital expenditures, including new lease commitments and investments in new business developments through partnerships and unconsolidated subsidiaries, will total $4.4 billion during 2000 through 2002. These estimates are prepared for planning purposes and are subject to revision. CMS Energy expects to satisfy a substantial portion of the capital expenditures with cash from operations. CMS Energy will continue to evaluate capital markets in 2000 as a potential source for financing its subsidiaries’ investing activities. CMS Energy estimates capital expenditures by business segment over the next three years as follows:


					In Millions

Years Ending December 31	2000		2001		2002

Consumers electric operations (a) (b)	$	438	$	580	$	545




Consumers gas operations (a)		117		140		145




Natural gas transmission, storage and processing		326		210		260




Independent power production		448		200		215




Oil and gas exploration and production		182		160		165




Marketing, services and trading		32		30		5




International energy distribution		89		25		—




Other		18		25		25

	$	1,650	$	1,370	$	1,360

(a)		These amounts include an attributed portion of Consumers’ anticipated capital expenditures for plant and equipment common to both the electric and gas utility businesses.




(b)		These amounts include estimates for capital expenditures possibly required to comply with recently revised national air quality standards under the Clean Air Act. For further information see Note 2, Uncertainties.

CMS-9

CMS Energy currently plans investments in the years 2000 through 2002 in focused markets, which include: North and South America; West Africa; the Middle East and India. Investments will be made in market segments which align with CMS Energy’s varied business units’ skills with a focus on optimization and integration of existing assets, as further discussed in Outlook section below.

OUTLOOK

As the deregulation and privatization of the energy industry takes place in global energy markets, CMS Energy has positioned itself to be a leading international integrated energy company acquiring, developing and operating energy facilities and providing energy services in the United States and selected world growth markets. In the immediate future, CMS Energy expects to continue to sharpen its geographic focus on key growth areas where it has significant business concentrations and opportunities. CMS Energy provides a complete range of international energy expertise from energy production to consumption. CMS Energy intends to pursue global growth by making energy investments that provide expansion opportunities for multiple CMS Energy businesses.

CMS Energy also enhances its growth strategy through an active portfolio management program (the ongoing sale of non-strategic assets), with proceeds reinvested in assets with greater potential for synergies with existing or planned assets. In particular, CMS Energy is reviewing its options regarding certain assets performing below prior expectations, including Argentine generating assets. CMS Energy also continues to seek improvement in the profitability of all assets retained in its portfolio.

Financial Plan

CMS Energy is currently implementing a financial plan to strengthen its balance sheet, reduce fixed expenses and enhance earnings per share growth. CMS Energy plans to raise $1 billion of asset sale proceeds and $400 million of consolidated project debt eliminations from asset sales by year-end 2000. As of August 1, 2000, CMS Energy has completed the sale of assets resulting in approximately $850 million of cash proceeds and associated debt reduction of consolidated project debt.

CMS Energy management believes that the sale of specific assets to interested industry buyers will allow CMS Energy to achieve more geographic and business focus, thereby permitting CMS Energy to concentrate on its most profitable and growing ventures.

CMS Energy will continue to evaluate alternatives to strengthen its balance sheet and to enhance shareholder value. These actions are expected to make further issuance of CMS Energy Common Stock unnecessary in the foreseeable future, except for issuances in connection with existing convertible securities, a major acquisition, employee benefit plans and the stock purchase plan.

The Board of Directors approved the repurchase of up to 10 million shares of CMS Energy Common Stock, from time to time, in open market or private transactions. As of August 1, 2000, CMS Energy had repurchased approximately 6.6 million shares.

CMS-10

Diversified Energy Outlook

CMS Energy expects to grow its diversified energy businesses (all businesses except for Consumers and Panhandle) by focusing on acquisitions and greenfield (new construction) projects in the United States, as well as high-growth markets in India, South America and the Middle East. Additionally, the growth strategy includes exploiting its West Africa oil and gas reserves, further developing markets for the fuel and methanol product derived in West Africa, and investigating expansion opportunities for its existing independent power project in West Africa. CMS Energy seeks to minimize operational and financial risks when operating internationally by utilizing multilateral financing institutions, procuring political risk insurance and hedging foreign currency exposure where appropriate.

CMS Energy intends to use its marketing, services and trading business to improve the return on CMS Energy’s other business assets. One method to achieve this goal is to use marketing and trading to enhance performance of assets, such as gas reserves and power plants. Other strategies include expanding CMS Energy’s industrial and commercial energy services to enhance our commodity marketing business, using CMS Energy’s gas production as a hedge to commodity risk in other areas of our business, and developing risk management products that address customer needs.

CMS Energy also intends to grow its oil and gas exploration and production business focusing its domestic interest gas exploration and production in west Texas and the Powder River Basin and its international interest in South America and Africa.

Consumers’ Electric Utility Outlook

Growth: Consumers expects average annual growth of approximately two and one half percent per year in electric system deliveries for the years 2000 to 2005 based on a steadily growing customer base. This growth rate does not take into account the possible impact on the industry of restructuring or changing regulation. Abnormal weather, changing economic conditions or the developing competitive market for electricity may affect actual electric deliveries by Consumers in future periods.

Competition and Regulatory Restructuring: Generally, electric restructuring is the regulatory and legislative attempt to introduce competition to the electric industry by allowing customers to choose their electric generation supplier. Competition affects, and will continue to affect, Consumers’ retail electric business. To remain competitive, Consumers has multi-year electric supply contracts with some of its largest industrial customers to provide power to some of their facilities. The MPSC approved these contracts as part of its phased introduction to competition. During the period from 2000 through 2005, depending on future business and regulatory circumstances, these contracts can be terminated or restructured. These contracts involve approximately 600 MW of customer power supply requirements. The ultimate financial impact of changes related to these power supply contracts is not known at this time.

As a result of a transition of the wholesale and retail electric businesses in Michigan to competition, Detroit Edison, in December 1996, gave Consumers the required four-year notice of its intent to terminate the current agreements under which the companies jointly operate the MEPCC. At the same time, Detroit Edison filed with the FERC seeking early termination of the agreements. The FERC has not acted on Detroit Edison’s application. Detroit Edison and Consumers are currently in negotiations to terminate or restructure the MEPCC operations. Consumers is unable to predict the outcome of these negotiations, but does not anticipate any adverse impacts caused by termination or restructuring of the MEPCC.

CMS-11

Since 1997, there have been repeated efforts made in the Michigan Legislature to enact electric restructuring legislation. On June 3, 2000, these efforts resulted in the passage of the “Customer Choice and Electricity Reliability Act,” which became effective June 5, 2000.

Uncertainty exists with respect to the enactment of federal legislation restructuring the electric power industry. A variety of bills introduced in Congress in recent years seek to change existing federal regulation of the industry. These federal bills could potentially affect or supercede state regulation; however, none have been enacted. Consumers cannot predict the outcome of electric restructuring on its financial position, liquidity, or results of operations.

Rate Matters: Prior to June 5, 2000 there were several pending rate issues that could have affected Consumers’ electric business. As a result of the passage of the Customer Choice and Electricity Reliability Act, certain MPSC rate proceedings and a complaint by ABATE seeking a reduction in rates have been dismissed.

For further information and material changes relating to the rate matters and restructuring of the electric utility industry, see Note 1, Corporate Structure and Basis of Presentation, and Note 2, Uncertainties, “Consumers’ Electric Utility Rate Matters – Electric Restructuring” and “Consumers’ Electric Utility Rate Matters – Electric Proceedings,” incorporated by reference herein.

Uncertainties: Several electric business trends or uncertainties may affect CMS Energy’s financial results and condition. These trends or uncertainties have, or CMS Energy reasonably expects could have, a material impact on net sales, revenues, or income from continuing electric operations. Such trends and uncertainties include: 1) capital expenditures for compliance with the Clean Air Act; 2) environmental liabilities arising from compliance with various federal, state and local environmental laws and regulations, including potential liability or expenses relating to the Michigan Natural Resources and Environmental Protection Act and Superfund; 3) electric industry restructuring, including the ability to offset the 5 percent reduction in residential rates with savings from Securitization and the ability to recover Stranded Costs; 4) the ability to meet peak electric demand loads at a reasonable cost and without market disruption and initiatives undertaken to reduce exposure to energy price increases; and 5) ongoing issues relating to the storage of spent nuclear fuel and the operating life of Palisades. For detailed information about these trends or uncertainties, see Note 2, Uncertainties, incorporated by reference herein.

CMS-12

Consumers Gas Utility Business Outlook

Growth: Consumers currently anticipates gas deliveries, including gas customer choice deliveries (excluding transportation to the MCV Facility and off-system deliveries), to grow at an average annual rate of between one and two percent over the next five years based primarily on a steadily growing customer base. Actual gas deliveries in future periods may be affected by abnormal weather, alternative energy prices, changes in competitive conditions, and the level of natural gas consumption per customer.

Gas Restructuring: In December 1997, the MPSC approved Consumers’ application to implement, effective April 1, 1998, a gas customer choice pilot program that was designed to encourage Consumers to minimize its purchased natural gas commodity costs while providing rate stability for its customers. The program allows 300,000 residential, commercial and industrial retail gas sales customers to choose an alternative gas commodity supplier in direct competition with Consumers. Unless some other arrangements are made, when this pilot program ends on March 31, 2001, these customers will again become Consumers’ gas commodity customers. The program is voluntary and participating natural gas customers are selected on a first-come, first-served basis, up to a limit of 100,000 per year. As of June 30, 2000, more than 160,000 customers chose alternative gas suppliers, representing approximately 11 bcf of gas load. Customers choosing to remain as sales customers of Consumers will not see a rate change in their gas rates. This three-year program: 1) freezes gas distribution rates through March 31, 2001, establishing a delivered gas commodity cost at a fixed rate of $2.84 per mcf; 2) establishes an earnings sharing mechanism with customers if Consumers’ earnings exceed certain pre-determined levels; and 3) establishes a gas transportation code of conduct that addresses the relationship between Consumers and marketers, including its affiliated marketers. In December 1999, the Court of Appeals affirmed in its entirety the December 1997 MPSC order. The Attorney General filed with the Michigan Supreme Court an application for leave to appeal the Court of Appeals’ decision. Subsequent to June 30, 2000, the MPSC issued an order directing Consumers and certain other Michigan gas utilities to undertake a collaborative process, including public meetings with MPSC staff and other interested parties during August and September 2000, for the purpose of developing uniform terms and conditions for the future provision of gas customer choice to all Michigan customers.

During the first two years of the pilot program, Consumers realized a benefit of $45 million as delivered gas commodity prices were below the $2.84 per mcf level collected from customers. Recent significant increases in gas prices have exposed Consumers to gas commodity losses during the last year of the program that ends March 31, 2001. Estimated loss of earnings for this last year of the program could range from $45 million to $135 million, of which Consumers has already recognized $45 million in the second quarter 2000 as a regulatory obligation. Under the provisions of the pilot program, Consumers has the right to request termination of the program at any time and to return to a GCR mechanism, pursuant to which the customer gas commodity prices would increase significantly from the current frozen rate. As an alternative to exercising that right, Consumers is considering an approach that, if approved by the MPSC, would potentially avoid further losses any greater than the $45 million already recognized and mitigate the customer rate increases that would otherwise result. It is expected that such an approach could be implemented this fall.

CMS-13

In December 1999, several bills related to gas industry restructuring were introduced into the Michigan Legislature. Combined, these bills constitute the “gas choice program.” Consumers is participating in the legislative process involving these bills. They provide for 1) a phased-in approach to gas choice requiring 40 percent of the customers to be allowed choice by April 2002, 60 percent by April 2003 and all customers by April 2004; 2) a market-based, unregulated pricing mechanism for gas commodity for customers who exercise choice; and 3) a new “safe haven” pricing mechanism for customers who do not exercise choice under which NYMEX pricing would be used to establish a statutory cap on gas commodity prices that could be charged by gas utilities instead of traditional cost of service regulation. The proposed bills also provide for a gas distribution service rate freeze until December 31, 2005, a code of conduct governing business relationships with affiliated gas suppliers and the MPSC licensing of all gas suppliers doing business in Michigan and imposes financial penalties for noncompliance. They also provide customer protection by preventing “slamming”, the switching of a customer’s gas supplier without consent, and “cramming”, the inclusion of optional products and services without the customer’s authorization. The bills establishing the gas choice program have become the subject of extensive legislative hearings during which there will undoubtedly be various amendments offered by many parties, including the gas utility coalition. Consumers cannot predict the timing or outcome of this legislative process.

Uncertainties: CMS Energy’s financial results and position may be affected by a number of trends or uncertainties that have, or CMS Energy reasonably expects could have, a material impact on net sales or revenues or income from continuing gas operations. Such trends and uncertainties include: 1) potential environmental costs at a number of sites, including sites formerly housing manufactured gas plant facilities; 2) a statewide experimental gas industry restructuring program; 3) permanent gas industry restructuring; and 4) implementation of a suspended GCR and the success or failure of initiatives undertaken to protect against gas commodity price increases.

Consumers’ Other Outlook

The Union represents Consumers’ operating, maintenance and construction employees. Consumers and the Union negotiated a new collective bargaining agreement that became effective as of June 1, 2000. By its terms, that agreement will continue in full force and effect until June 1, 2005. Consumers is evaluating the financial effect of changes in the agreement.

Consumers offers a variety of energy-related services to electric and gas customers focused upon appliance maintenance, home safety, commodity choice and assistance to customers purchasing heating, ventilation and air conditioning equipment. Consumers continues to look for additional growth opportunities in energy-related services for Consumers’ customers.

CMS-14

Panhandle Outlook

CMS Energy intends to use Panhandle as a platform for expansion in the United States. The growth strategy around Panhandle includes enhancing the opportunities to extract value for other CMS businesses involved in electric power generation and distribution, gathering, processing, exploration and production. The market for transmission of natural gas to the Midwest is increasingly competitive, however, and may become more so in light of projects recently completed or in progress to increase Midwest transmission capacity for gas originating in Canada and the Rocky Mountain region. As a result, there continues to be pressure on prices charged by Panhandle and an increasing necessity to discount the prices charged from the legal maximum, which reduces revenues. New contracts in the current market conditions tend to be of shorter duration than the expiring contracts being replaced, which will also increase revenue volatility. In addition, Trunkline in 1996 filed with FERC and placed into effect a general rate increase; however, a subsequent January 2000 FERC order could, if approved without modification upon rehearing, reduce Trunkline’s tariff rates and future revenue levels by up to 3% of Panhandle’s consolidated revenues. Panhandle continues to be selective in offering discounts to maximize revenues from existing capacity and to advance projects that provide expanded services to meet the specific needs of customers.

Regulatory Matters: For detailed information about Panhandle’s regulatory uncertainties see Note 2, Uncertainties – Panhandle Matters, incorporated by reference herein.

OTHER MATTERS

New Accounting Rules

In 1999, the FASB issued SFAS 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No.133. In June 2000, the FASB also issued SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities, an amendment of FASB Statement No. 133. SFAS 137 defers the effective date of SFAS 133, Accounting for Derivative Instruments and Hedging Activities, to January 1, 2001, and SFAS 138 clarifies certain issues pertaining to SFAS 133. CMS Energy is currently studying SFAS 133 and will adopt SFAS 133 as of January 1, 2001, but has yet to quantify the effects of adoption on its financial statements.

Foreign Currency Translation

CMS Energy adjusts common stockholders equity to reflect foreign currency translation adjustments for the operation of long-term investments in foreign countries. The adjustment is primarily due to the exchange rate fluctuations between the United States dollar and each of the Australian dollar, Brazilian real and Argentine peso. From January 1, 2000 through June 30, 2000, the foreign currency translation amount realized from asset sales increased equity by $25 million and the change in the foreign currency translation adjustment decreased equity by $90 million, net of after-tax hedging proceeds. Although management currently believes that the currency exchange rate fluctuations over the long term will not have a material adverse affect on CMS Energy’s financial position, liquidity or results of operations, CMS Energy has hedged its exposure to the Australian dollar, the Brazilian real and the Argentine peso. CMS Energy uses forward exchange and option contracts to hedge certain receivables, payables, long-term debt and equity value relating to foreign investments. The notional amount of the outstanding foreign exchange contracts was $370 million at June 30, 2000, which includes $25 million, $150 million and $195 million for Australian, Brazilian and Argentine foreign exchange contracts, respectively. The estimated fair value of the foreign exchange and option contracts at June 30, 2000 was $18 million, representing the amount CMS Energy would pay upon settlement.

CMS-15

CMS Energy Corporation
Consolidated Statements of Income
(Unaudited)


			Three Months Ended						Six Months Ended

June 30			2000			1999			2000			1999

						In Millions, Except Per Share Amounts

Operating Revenue Electric utility			$	647		$	663		$	1,287		$	1,299




	Gas utility			148			175			623			681




	Natural gas transmission, storage and processing			177			186			355			290




	Independent power production			131			86			212			158




	Oil and gas exploration and production			33			25			65			44




	Marketing, services and trading			391			146			742			304




	International energy distribution			65			45			128			83




	Other			7			6			14			10

				1,599			1,332			3,426			2,869

Operating Expenses Operation
		Fuel for electric generation		104			106			182			199




		Purchased power — related parties		151			139			297			278




		Purchased and interchange power		163			103			331			206




		Cost of gas sold		430			253			1,021			749




		Other		261			253			489			459

				1,109			854			2,320			1,891




	Maintenance			73			49			149			88




	Depreciation, depletion and amortization			142			138			318			288




	General taxes			70			60			141			126

				1,394			1,101			2,928			2,393

Pretax Operating Income (Loss) Electric utility				109			122			224			256




	Gas utility			(28	)		16			35			94




	Natural gas transmission, storage and processing			47			43			124			46




	Independent power production			68			39			85			66




	Oil and gas exploration and production			6			5			10			7




	Marketing, services and trading			—			(4	)		4			—




	International energy distribution			4			2			10			(4	)




	Other			(1	)		8			6			11

				205			231			498			476

Other Income (Deductions) Accretion income				1			1			1			2




	Accretion expense			(2	)		(4	)		(4	)		(7	)




	Gain on asset sales, net of foreign currency translation losses of $25 in 2000			61			7			69			9




	Other, net			1			11			(3	)		13

				61			15			63			17

Fixed Charges Interest on long-term debt				144			134			291			230




	Other interest			12			11			12			24




	Capitalized interest			(11	)		(13	)		(21	)		(23	)




	Preferred dividends			—			—			1			5




	Preferred securities distributions			24			9			47			17

				169			141			330			253




Income Before Income Taxes and Minority Interests				97			105			231			240




Income Taxes				15			30			68			67




Minority Interests				1			—			2			—

Consolidated Net Income			$	81		$	75		$	161		$	173

CMS-16


		Three Months Ended				Six Months Ended

June 30		2000		1999		2000		1999

				In Millions, Except Per Share Amounts
Net Income Attributable to Common Stocks	CMS Energy	$	81	$	74	$	161	$	162




	Class G		-	$	1		-	$	11





Average Common Shares Outstanding	CMS Energy		110		109		112		108
	Class G		-		9		-		9





Basic Earnings Per Average Common Share	CMS Energy	$	.73	$	.68	$	1.44	$	1.50




	Class G		-	$	.10		-	$	1.28





Diluted Earnings Per Average Common Share	CMS Energy	$	.72	$	.67	$	1.42	$	1.48




	Class G		-	$	.10		-	$	1.28





Dividends Declared Per Common Share	CMS Energy	$	.365	$	.33	$	.73	$	.66




	Class G		-	$	.325		-	$	.65

The accompanying condensed notes are an integral part of these statements.

CMS-17

CMS Energy Corporation
Consolidated Statements of Cash Flows
(Unaudited)


				Six Months Ended

June 30				2000			1999

							In Millions

Cash Flows from Operating Activities Consolidated net income				$	161		$	173




	Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization (includes nuclear decommissioning of $19 and $24, respectively)				318			288




		Capital lease and debt discount amortization			16			26




		Accretion expense			4			7




		Accretion income — abandoned Midland project			(1	)		(2	)




		MCV power purchases			(28	)		(28	)




		Undistributed earnings of related parties			(101	)		(46	)




		Deferred income taxes and investment tax credit			(37	)		43




		Gain on the sale of assets, net of foreign currency translation losses			(69	)		(9	)




		Regulatory obligation — gas choice			45			—




		Changes in other assets and liabilities			(125	)		(12	)

			Net cash provided by operating activities		183			440

Cash Flows from Investing Activities Acquisition of companies, net of cash acquired					(74	)		(1,899	)




	Capital expenditures (excludes assets placed under capital lease)				(488	)		(291	)




	Investments in partnerships and unconsolidated subsidiaries				(24	)		(258	)




	Cost to retire property, net				(53	)		(39	)




	Proceeds from sale of property				574			16




	Other				28			30

			Net cash used in investing activities		(37	)		(2,441	)





Cash Flows from Financing Activities Proceeds from bank loans, notes and bonds					344			2,463




	Issuance of common stock				3			51




	Retirement of bonds and other long-term debt				(234	)		(48	)




	Repurchase of common stock				(129	)		—




	Increase (decrease) in notes payable, net				74			(64	)




	Payment of common stock dividends				(82	)		(77	)




	Payment of capital lease obligations				(14	)		(18	)




	Retirement of preferred stock				—			(194	)

			Net cash provided by (used in) financing activities		(38	)		2,113

Net Increase in Cash and Temporary Cash Investments					108			112




Cash and Temporary Cash Investments, Beginning of Period					132			101

Cash and Temporary Cash Investments, End of Period				$	240		$	213

CMS-18


Other cash flow activities and non-cash investing and financing activities were:




Cash transactions




		Interest paid (net of amounts capitalized)	$	258	$	186




		Income taxes paid (net of refunds)		24		41




	Non-cash transactions




		Nuclear fuel placed under capital lease	$	3	$	(2	)
		Other assets placed under capital leases		7		7




		Assumption of debt		—		305

All highly liquid investments with an original maturity of three months or less are considered cash equivalents.

The accompanying condensed notes are an integral part of these statements.

CMS-19

CMS Energy Corporation
Consolidated Balance Sheets


			June 30				June 30
			2000		December 31		1999
ASSETS			(Unaudited)		1999		(Unaudited)

							In Millions

Plant and Property (At cost) Electric utility			$	7,073	$	6,981	$	6,832




	Gas utility			2,497		2,461		2,394




	Natural gas transmission, storage and processing			2,078		1,934		1,882




	Independent power production			734		974		575




	Oil and gas properties (successful efforts method)			531		817		706




	International energy distribution			446		445		368




	Other			93		62		49

				13,452		13,674		12,806




	Less accumulated depreciation, depletion and amortization			6,207		6,157		5,917

				7,245		7,517		6,889




	Construction work-in-progress			854		604		363

				8,099		8,121		7,252

Investments Independent power production				957		950		1,017




	Natural gas transmission, storage and processing			382		369		498




	International energy distribution			41		150		146




	Midland Cogeneration Venture Limited Partnership			261		247		230




	First Midland Limited Partnership			246		240		238




	Other			42		40		35

				1,929		1,996		2,164

Current Assets Cash and temporary cash investments at cost, which approximates market				240		132		213




	Accounts receivable, notes receivable and accrued revenue, less allowances of $20, $12 and $15, respectively			1,030		959		931




	Inventories at average cost Gas in underground storage			166		225		167




		Materials and supplies		196		158		145




		Generating plant fuel stock		47		47		32




	Deferred income taxes			16		33		9




	Prepayments and other			249		263		196

				1,944		1,817		1,693

Non-current Assets Goodwill, net				915		891		709




	Nuclear decommissioning trust funds			612		602		581




	Unamortized nuclear costs			490		519		521




	Notes and lease receivable			421		44		6




	Postretirement benefits			333		348		358




	Notes receivable — related party			223		251		15




	Abandoned Midland project			35		48		60




	Other			706		825		780

				3,735		3,528		3,030

Total Assets			$	15,707	$	15,462	$	14,139

CMS-20


			June 30				June 30
			2000		December 31		1999
STOCKHOLDERS' INVESTMENT AND LIABILITIES			(Unaudited)		1999		(Unaudited)

							In Millions

Capitalization Common stockholders’ equity			$	2,345	$	2,456	$	2,390




Preferred stock of subsidiary				44		44		44




	Company-obligated mandatorily redeemable preferred securities of:




		Consumers Power Company Financing I (a)		100		100		100




		Consumers Energy Company Financing II (a)		120		120		120




		Consumers Energy Company Financing III (a)		175		175		—




	Company-obligated convertible Trust Preferred Securities of:




		CMS Energy Trust I (b)		173		173		173




		CMS Energy Trust II (b)		301		301		—




	Company-obligated Trust Preferred Securities of CMS RHINOS Trust (c)			250		250		250




	Long-term debt			6,918		6,987		7,079




	Non-current portion of capital leases			197		88		92

				10,623		10,694		10,248

Minority Interests				212		222		148





Current Liabilities Current portion of long-term debt and capital leases				547		552		306




	Notes payable			278		230		264




	Accounts payable			824		775		397




	Accrued taxes			309		320		261




	Accrued interest			163		148		106




	Accounts payable — related parties			65		61		73




	Power purchases — MCV Partnership			47		47		47




	Accrued refunds			—		11		14




	Other			375		363		363

				2,608		2,507		1,831

Non-current Liabilities Deferred income taxes				612		702		646




	Postretirement benefits			469		485		488




	Deferred investment tax credit			122		126		131




	Regulatory liabilities for income taxes, net			82		64		115




	Power purchases — MCV Partnership			50		73		101




	Other			929		589		431

				2,264		2,039		1,912

Commitments and Contingencies (Notes 1 and 2)




Total Stockholders’ Investment and Liabilities			$	15,707	$	15,462	$	14,139

(a)		The primary asset of Consumers Power Company Financing I is $103 million principal amount of 8.36 percent subordinated deferrable interest notes due 2015 from Consumers. The primary asset of Consumers Energy Company Financing II is $124 million principal amount of 8.20 percent subordinated deferrable interest notes due 2027 from Consumers. The primary asset of Consumers Energy Company Financing III is $180 million principal amount of 9.25 percent subordinated deferrable interest notes due 2029 from Consumers. For further discussion, see Note 7 to the Consolidated Financial Statements contained in CMS Energy’s 1999 Form 10-K .




(b)		The primary asset of CMS Energy Trust I is $178 million principal amount of 7.75 percent convertible subordinated deferrable interest debentures due 2027 from CMS Energy. The primary asset of CMS Energy Trust II is $310 million principal amount of 8.625 percent convertible junior subordinated debentures due July 2004 from CMS Energy. For further discussion, see Note 7 contained in CMS Energy’s 1999 Form 10-K.




(c)		As described in Note 7 contained in CMS Energy’s 1999 Form 10-K, the primary asset of CMS RHINOS Trust is $258 million principal amount of LIBOR plus 1.75 percent subordinated deferrable interest debentures due September 2001 from CMS Energy.

The accompanying condensed notes are an integral part of these statements.

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CMS Energy Corporation
Consolidated Statements of Common Stockholders’ Equity
(Unaudited)


					Three Months Ended						Six Months Ended

June 30					2000			1999			2000			1999

											In Millions

Common Stock At beginning and end of period					$	1		$	1		$	1		$	1




Other Paid-in Capital At beginning of period						2,653			2,619			2,749			2,594




	Redemption of affiliate’s preferred stock					—			—			—			(2	)




	Common stock repurchased					(27	)		—			(129	)		—




	Common stock reissued					—			—			3			—




	Common stock issued:




		CMS Energy				—			21			3			47




		Class G				—			3			—			4

			At end of period			2,626			2,643			2,626			2,643

Revaluation Capital At beginning of period						3			(13	)		3			(9	)




	Change in unrealized investments-gain (loss) (a)					(2	)		23			(2	)		19

			At end of period			1			10			1			10

Foreign Currency Translation At beginning of period						(132	)		(141	)		(108	)		(136	)




	Change in foreign currency translation realized from asset sale (a)					—			—			25			—




	Change in foreign currency translation (a)					(41	)		15			(90	)		10

			At end of period			(173	)		(126	)		(173	)		(126	)

Retained Earnings (Deficit) At beginning of period						(151	)		(174	)		(189	)		(234	)




	Consolidated net income (a)					81			75			161			173




	Common stock dividends declared:




		CMS Energy				(40	)		(36	)		(82	)		(71	)




		Class G				—			(3	)		—			(6	)

			At end of period			(110	)		(138	)		(110	)		(138	)

Total Common Stockholders’ Equity					$	2,345		$	2,390		$	2,345		$	2,390

(a) Disclosure of Comprehensive Income:




				Revaluation capital Unrealized investments-gain (loss), net of tax of $-, $(12), $- and $(10), respectively	$	(2	)	$	23		$	(2	)	$	19




				Foreign currency translation, net		(41	)		15			(65	)		10




				Consolidated net income		81			75			161			173

				Total Consolidated Comprehensive Income	$	38		$	113		$	94		$	202

The accompanying condensed notes are an integral part of these statements.

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CMS Energy Corporation
Condensed Notes to Consolidated Financial Statements

These Condensed Notes and their related Consolidated Financial Statements should be read along with the Consolidated Financial Statements and Notes contained in the 1999 Form 10-K of CMS Energy, which includes the Reports of Independent Public Accountants. Certain prior year amounts have been reclassified to conform with the presentation in the current year. In the opinion of management, the unaudited information herein reflects all adjustments necessary to assure the fair presentation of financial position, results of operations and cash flows for the periods presented.

1: Corporate Structure and Basis of Presentation

Corporate Structure and Basis of Presentation

CMS Energy is the parent holding company of Consumers and Enterprises. Consumers, a combination electric and gas utility company serving the Lower Peninsula of Michigan, is a subsidiary of CMS Energy. Enterprises, through subsidiaries, is engaged in several domestic and international diversified energy businesses including: natural gas transmission, storage and processing; independent power production; oil and gas exploration and production; energy marketing, services and trading; and international energy distribution.

The consolidated financial statements include CMS Energy, Consumers and Enterprises and their majority owned subsidiaries. The financial statements are prepared in conformity with generally accepted accounting principles and use management’s estimates where appropriate. Affiliated companies (where CMS Energy has more than 20 percent but less than a majority ownership interest) are accounted for by the equity method. For the three and six months ended June 30, 2000, undistributed equity earnings were $73 million and $101 million, respectively compared to $30 million and $46 million for the three and six months ended June 30, 1999, respectively.

Foreign currency translation adjustments relating to the operation of CMS Energy’s long-term investments in foreign countries are included in common stockholders’ equity. From January 1, 2000 through June 30, 2000, the foreign currency translation amount realized from assets sales increased equity by $25 million and the change in the foreign currency translation adjustment decreased equity by $90 million, net of after-tax hedging proceeds.

Oil and Gas Properties

CMS Oil and Gas follows the successful efforts method of accounting for its investments in oil and gas properties. CMS Oil and Gas capitalizes, as incurred, the costs of property acquisitions, successful exploratory wells, all development costs, and support equipment and facilities. It expenses unsuccessful exploratory wells when they are determined to be non-productive. CMS Oil and Gas also charges to expense, as incurred, production costs, overhead, and all exploration costs other than exploratory drilling. CMS Oil and Gas determines depreciation, depletion and amortization of proved oil and gas properties on a field-by-field basis using the units-of-production method over the life of the remaining proved reserves.

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Utility Regulation

Consumers accounts for the effects of regulation based on the regulated utility accounting standard SFAS 71, Accounting for the Effects of Certain Types of Regulation. As a result, the actions of regulators affect when Consumers recognizes revenues, expenses, assets and liabilities.

In March 1999, Consumers received MPSC electric restructuring orders. Consistent with these orders, Consumers discontinued application of SFAS 71 for the energy supply portion of its business in the first quarter of 1999 because Consumers expected to implement retail open access for its electric customers in September 1999. Discontinuation of SFAS 71 for the energy supply portion of Consumers’ business resulted in Consumers reducing the carrying value of its Palisades plant-related assets by approximately $535 million and establishing a regulatory asset for a corresponding amount. According to current accounting standards, Consumers can continue to carry its energy supply-related regulatory assets if legislation or an MPSC rate order allows the collection of cash flows to recover these regulatory assets from its regulated transmission and distribution customers. At June 30, 2000, Consumers had a net investment in energy supply facilities of $1.017 billion included in electric plant and property. See Note 2, Uncertainties, “Consumers’ Electric Utility Rate Matters – Electric Restructuring.”

Acquisition

In March 1999, CMS Energy, through a subsidiary, acquired Panhandle from Duke Energy for a cash payment of $1.9 billion and existing Panhandle debt of $300 million. CMS Energy used the purchase method of accounting to account for the acquisition and, accordingly, included the results of operations of Panhandle for the period from March 29, 1999 in the accompanying consolidated financial statements. Assets acquired and liabilities assumed are recorded at their fair values. CMS Energy allocated the excess purchase price over the fair value of net assets acquired of approximately $800 million to goodwill and amortizes this amount on a straight-line basis over 40 years.

The following unaudited pro forma amounts for operating revenue, consolidated net income, basic earnings per share and diluted earnings per share, as if the acquisition had occurred on January 1, 1999, illustrate the effects of: (1) various restructuring, realignment, and elimination of activities between Panhandle and Duke Energy prior to the closing of the acquisition by CMS Energy; (2) the adjustments resulting from the acquisition by CMS Energy; and (3) financing transactions which include the public issuance of $800 million of senior notes by Panhandle, $850 million of senior notes by CMS Energy, and the private sale of $250 million of Trust Preferred Securities by CMS Energy.

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	In Millions, except per share amounts

Six Months Ended June 30,	2000		1999

Operating revenue	$	3,426	$	3,004




Consolidated net income	$	161	$	184




Basic earnings per share	$	1.44	$	1.59




Diluted earnings per share	$	1.42	$	1.57

2: Uncertainties

Consumers’ Electric Utility Contingencies

Electric Environmental Matters: The Clean Air Act limits emissions of sulfur dioxide and nitrogen oxides and requires emissions and air quality monitoring. Consumers currently operates within these limits and meets current emission requirements. The Clean Air Act requires the EPA to review periodically the effectiveness of the national air quality standards in preventing adverse health effects.

1997 EPA Revised NOx and Small Particulate Emissions Standards — In 1997, the EPA revised these standards to impose further limitations on nitrogen oxide and small particulate-related emissions. After a United States Court of Appeals found the revision an unconstitutional delegation of legislative power, the EPA suspended the standards under the 1997 rule and reinstated the pre-1997 standards. In January 2000, the Department of Justice filed a petition for the United States Supreme Court to review the case. In May 2000, the Supreme Court agreed to hear the appeal.

1998 EPA Plan for NOx Emissions — In September 1998, based in part upon the 1997 standards, the EPA Administrator issued final regulations requiring the state of Michigan to further limit nitrogen oxide emissions. Consumers anticipates a reduction in nitrogen oxide emissions by 2003 to only 32 percent of levels allowed for the year 2000. The state of Michigan had one year to submit an implementation plan. The state of Michigan filed a lawsuit objecting to the extent of the required emission reductions and requesting an extension of the submission date. In May 1999, the United States Court of Appeals granted an indefinite stay of the submission date for the state of Michigan’s implementation plan. In early 2000, the United States Court of Appeals upheld the EPA’s final regulations. The state of Michigan has filed a petition with the United States Supreme Court appealing this ruling. During this time period, the state of Michigan established alternative less stringent nitrogen oxide emission reduction requirements. At this time the state of Michigan has decided to draft new rules to comply with the EPA requirements in parallel with its appeal to the supreme court.

Section 126 Petitions — In December 1999, the EPA Administrator signed a revised final rule under Section 126 of the Clean Air Act. The rule requires some electric utility generators, including some of Consumers’ electric generating facilities, to achieve the same emission rate as that required by the currently challenged September 1998 EPA final rule. Under the revised Section 126 rule, the emission rate will become effective on May 1, 2003 and apply during the ozone season in 2003 and during each subsequent year. Various parties’ petitions challenging the EPA’s rule have been filed.

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Until all air quality targets are conclusively established, the estimated cost of compliance discussed below is subject to revision.

Cost of Environmental Law Compliance — The preliminary estimates of capital expenditures to reduce nitrogen oxide-related emissions to the level proposed by the state of Michigan for Consumers’ fossil-fueled generating units range from $150 million to $290 million, calculated in 2000 dollars. If Consumers has to meet the EPA’s 1998 and/or Section 126 petition requirements, the estimated cost to Consumers would be between $290 million and $500 million, calculated in 2000 dollars. In both cases the lower estimate represents the capital expenditure level that would satisfactorily meet the proposed emissions limits but would result in higher operating expense. The higher estimate in the range includes expenditures that result in lower operating costs while complying with the proposed emissions limit. Consumers anticipates that it will incur these capital expenditures between 2000 and 2004, or between 2000 and 2003 if the EPA ultimately imposes its limits. In addition, Consumers expects to incur cost of removal related to this effort, but is unable to predict the amount at this time.

Consumers may need an equivalent amount of capital expenditures to comply with the new small particulate standards sometime after 2004 if those standards become effective.

Consumers’ coal-fueled electric generating units burn low-sulfur coal and are currently operating at or near the sulfur dioxide emission limits. Beginning in 1992 and continuing into 2000, Consumers incurred capital expenditures totaling $72 million to install equipment at certain generating units to comply with the acid rain provisions of the Clean Air Act. Management believes that these expenditures will not materially affect Consumers’ annual operating costs.

Cleanup and Solid Waste — Under the Michigan Natural Resources and Environmental Protection Act, Consumers expects that it will ultimately incur investigation and remedial action costs at a number of sites. Nevertheless, it believes that these costs are recoverable in rates under current ratemaking policies.

Consumers is a potentially responsible party at several contaminated sites administered under Superfund. Superfund liability is joint and several. Along with Consumers, many other creditworthy, potentially responsible parties with substantial assets cooperate with respect to the individual sites. Based upon past negotiations, Consumers estimates that its share of the total liability for the known Superfund sites will be between $2 million and $9 million. At June 30, 2000, Consumers has accrued the minimum amount of the range for its estimated Superfund liability.

During routine maintenance activities, Consumers identified PCB as a component in certain paint, grout and sealant materials at the Ludington Pumped Storage Facility. Consumers removed and replaced part of the PCB material. Consumers is studying the remaining materials and determining options and their related costs.

Antitrust: In October 1997, two independent power producers sued Consumers in a federal court. The suit alleged antitrust violations relating to contracts which Consumers entered into with some of its customers, and interference with contract claims relating to proposed power facilities. In March 1999, the court issued an opinion and order granting Consumers’ motion for summary judgment, resulting in the dismissal of the case. The plaintiffs appealed this decision. Consumers cannot predict the outcome of this appeal.

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Consumers Electric Utility Rate Matters

Electric Restructuring: Since 1997, there have been repeated efforts made in the Michigan Legislature to enact electric restructuring legislation. On June 3, 2000, these efforts resulted in the passage of the “Customer Choice and Electricity Reliability Act,” which became effective June 5, 2000. This act: 1) permits all customers to exercise choice of electric generation suppliers by January 1, 2002; 2) cuts residential electric rates by 5 percent; 3) freezes all electric rates through December 31, 2003, and establishes a rate cap for residential customers through at least December 31, 2005, and a rate cap for small commercial and industrial customers through at least December 31, 2004; 4) allows for the use of Securitization to refinance stranded costs as a means of offsetting the earnings impact of the 5 percent residential rate reduction; 5) establishes a market power test which may require the transfer of control of a portion of generation resources in excess of that required to serve firm retail sales load; 6) requires Michigan utilities to join a FERC approved RTO or divest its interest in transmission facilities to an independent transmission owner; 7) requires the expansion of available transmission capability by at least 2,000 MW by January 1 of 2003; and 8) allows for the recovery of stranded costs and implementation costs incurred as a result of the passage of the act.

In September 1999, Consumers began implementing a plan for electric retail customer open access. Consumers submitted this plan to the MPSC in 1998, and the MPSC issued electric restructuring orders in March 1999 that generally supported the plan. The Customer Choice and Electricity Reliability Act states that orders issued by the MPSC before the date of this act that; 1) allow electric customers to choose their supplier, 2) authorize recovery of net stranded costs and implementation costs, and 3) confirm any voluntary commitments of electric utilities, are in compliance with this act and enforceable by the MPSC. On June 19, 2000, the MPSC issued an order requiring Consumers to file tariffs governing its retail open access program and any revisions appropriate to comply with the Customer Choice and Electricity Reliability Act. Consumers cannot predict how the MPSC will modify the tariffs or enforce the existing restructuring orders.

On June 9, 2000, the Court of Appeals issued an opinion relating to a number of consolidated MPSC restructuring orders. The opinion primarily involved issues that the Customer Choice and Electricity Reliability Act has rendered moot. In a separate pending case, ABATE and the Attorney General each appealed an August 1999 order in which the MPSC found that it had jurisdiction to approve rates, terms and conditions for electric retail wheeling (also known as electric customer choice) if a utility voluntarily chooses to offer that service. Consumers believes that the Customer Choice and Electricity Reliability Act has rendered the issue moot, but cannot predict how the Court of Appeals will resolve the issue.

During periods when electric demand is high, the cost of purchasing energy on the spot market can be substantial. To reduce Consumers’ exposure to the fluctuating cost of electricity, and to ensure adequate supply to meet demand, Consumers is planning to maintain sufficient generation and to purchase electricity from others to create a power reserve (also called a reserve margin). Consumers plans a reserve margin of approximately 15 percent. The reserve margin provides Consumers with additional power above its anticipated peak power demands. It also allows Consumers to provide reliable service to its electric service customers and to protect itself against unscheduled plant outages and unanticipated demand. Consumers estimates the actual reserve margin for summer 2000 is in the range of 13 percent to 16 percent. The ultimate reserve margin will depend on summer weather conditions and on the level of retail open access load being served by others this summer. (Consumers offered other electric service providers with the opportunity to serve up to 600 MW of nominal retail open access load during summer 2000. As of June 30, 2000, no other electric service provider is serving the retail open access load.) To reduce the risk of

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high energy prices during peak demand periods and to achieve its reserve margin target, Consumers has employed a strategy of purchasing electric call option contracts for the physical delivery of electricity during the months of June through September. Consumers expects to use a similar strategy in the future. As of June 30, 2000, Consumers had purchased or had commitments to purchase electric call option contracts for summer 2000 at a cost of approximately $51 million, of which $6 million had expired. Additionally, as of June 30, 2000 Consumers had purchased or had commitments to purchase electric call option contracts partially covering the reserve margin requirements for summer 2001, 2002 and 2003 at a cost of $13 million with expected total future purchases to reach $56 million this year.

In June 1999, Consumers and four other electric utility companies sought approval from the FERC to form the Alliance RTO. The proposed structure provided for the creation of a transmission entity that would control, operate and own transmission facilities of one or more of the member companies. The proposal was structured to give the member companies the flexibility to maintain or divest ownership of their transmission facilities while ensuring independent operation of the regional transmission system. In December 1999, the FERC conditionally approved formation of Alliance, but asked the applicants to make a number of changes in the proposal and to provide additional information. Among other things, the FERC expressed concern about the proposed governance structure of Alliance, its rates and its geographic configuration. Consumers and the Alliance companies sought rehearing of the Alliance order. Additionally, in a February 2000 compliance filing, the Alliance companies addressed some of the concerns expressed in the December 1999 Alliance order. Consumers is uncertain about the outcome of the Alliance matter before the FERC and its continued participation in Alliance.

On the same day as the December 1999 Alliance order, the FERC issued Order No. 2000, which describes the characteristics the FERC would find acceptable in an RTO. In Order No. 2000, the FERC declined to mandate that utilities join RTOs, but did order utilities to make filings in October 2000 and January 2001 declaring their intentions with respect to RTO membership.

In May 2000, the FERC issued an order on compliance filing and request for rehearing and clarification. The order concluded that the Alliance RTO’s proposed structure is not in the proper scope and configuration. The FERC rejected the Alliance companies’ proposal to allow 25 percent cumulative active ownership of the Alliance RTO by the transmission owners. The May 2000 order also required the applicants to make a rate compliance filing. The FERC did not substantively address Consumers’ alternative governance structure. In June 2000, Consumers filed a request for hearing of the May 2000 order and also separately sought once again approval of its alternative governance structure. Consumers also filed a petition for review of the May 2000 order in the United States Court of Appeals for the District of Columbia Circuit.

Electric Proceedings: In 1996, the MPSC issued a final order that authorized Consumers to recover costs associated with the purchase of the additional 325 MW of MCV Facility capacity (see “Power Purchases from the MCV Partnership” in this Note). In addition, the order allowed Consumers to recover its nuclear plant investment by increasing prospective annual nuclear plant depreciation expense by $18 million, with a corresponding decrease in fossil-fueled generating plant depreciation expense. The order also established an experimental direct-access program. The Attorney General, ABATE, the MCV Partnership and other parties filed appeals with the Court of Appeals challenging the MPSC’s 1996 order. In 1999, the Court of Appeals affirmed the MPSC’s 1996 order in all respects. The Attorney General, however, filed an application for leave to appeal this decision to the Michigan Supreme Court. In June 2000, the Michigan Supreme Court denied the application for leave to appeal.

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In 1997, ABATE filed a complaint with the MPSC. The complaint alleged that Consumers’ electric earnings are more than its authorized rate of return and sought an immediate reduction in Consumers’ electric rates that approximated $189 million annually. As a result of the passage of the rate freeze imposed by the Customer Choice and Electricity Reliability Act, the MPSC issued an order on June 19, 2000 dismissing the ABATE complaint. On July 12, 2000 ABATE filed a rehearing petition with the MPSC. Consumers cannot predict the outcome of the rehearing process.

Before 1998, the PSCR process provided for the reconciliation of actual power supply costs with power supply revenues. This process assured recovery of all reasonable and prudent power supply costs actually incurred by Consumers, such as, the actual cost of fuel, interchange power and purchased power. In 1998, as part of the electric restructuring efforts, the MPSC suspended the PSCR process through December 31, 2001. Under the suspension, the MPSC would not grant adjustment of customer rates through 2001. In March 2000, Consumers filed an application with the MPSC requesting reinstatement of the PSCR clause, approval of a PSCR plan, and authorization of monthly PSCR factors from July 2000 through June 2001. As a result of the rate freeze imposed by the Customer Choice and Electricity Reliability Act, the MPSC issued an order on June 19, 2000 dismissing this application.

Other Consumers Electric Utility Uncertainties

The Midland Cogeneration Venture: The MCV Partnership, which leases and operates the MCV Facility, contracted to sell electricity to Consumers for a 35-year period beginning in 1990 and to supply electricity and steam to Dow. Consumers, through two wholly owned subsidiaries, holds the following assets related to the MCV Partnership and MCV Facility: 1) CMS Midland owns a 49 percent general partnership interest in the MCV Partnership; and 2) CMS Holdings holds, through FMLP, a 35 percent lessor interest in the MCV Facility.

Summarized Statements of Income for CMS Midland and CMS Holdings (unaudited)


			In Millions

	Six Months Ended

June 30	2000			1999

Pretax operating income	$	20		$	26




Income taxes and other		6			8

Net income	$	14		$	18

Power Purchases from the MCV Partnership — Consumers’ annual obligation to purchase capacity from the MCV Partnership is 1,240 MW through the termination of the PPA in 2025. The PPA provides that Consumers is to pay, based on the MCV Facility’s availability, a levelized average capacity charge of 3.77 cents per kWh, a fixed energy charge, and a variable energy charge based primarily on Consumers’ average cost of coal consumed for all kWh delivered. Since January 1, 1993, the MPSC has permitted Consumers to recover capacity charges averaging 3.62 cents per kWh for 915 MW, plus a substantial portion of the fixed and variable energy charges. Since January 1, 1996, the MPSC has also permitted Consumers to recover capacity charges for the remaining 325 MW of contract capacity with an initial average charge of 2.86 cents per kWh increasing periodically to an eventual 3.62 cents per kWh by 2004 and thereafter. After September 2007, under the terms of the PPA, Consumers will only be required to pay the MCV Partnership capacity and energy charges that the MPSC has authorized for recovery from electric customers.

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In March 1999, Consumers signed a long-term power sales agreement to resell to PECO its capacity and energy purchases under the PPA until September 2007. Implementation of the agreement is contingent upon regulatory treatment satisfactory to Consumers. Such treatment is not yet assured. Under the terms of the agreement, after a three-year transition period during which 100 to 150 MW will be sold to PECO, beginning in 2002 Consumers will sell all 1,240 MW of PPA capacity and associated energy to PECO. In March 1999, Consumers also filed an application with the MPSC for accounting and ratemaking approvals related to the PECO agreement. If used as an offset to electric customers’ Transition Cost responsibility, Consumers estimates that there could be a reduction of as much as $58 million (on a net present value basis) of Transition Cost related to the MCV PPA. In an order issued in April 1999, the MPSC conditionally approved the requests for accounting and rate-making treatment to the extent that customer rates are not increased from the current level absent the agreement and as modified by the order. In response to Consumers’ and other parties’ requests for clarification and rehearing, in an August 1999 opinion, the MPSC partially granted the relief Consumers requested on rehearing and attached certain additional conditions to its approval. Those conditions relate to Consumers continued decision to carry out the electricity customer choice program (which Consumers has affirmed as discussed above) and a determination to file for approval of a revised capacity solicitation process (which Consumers filed). The August opinion is a companion order to a power supply cost reconciliation order issued on the same date in another case. This order affects the level of frozen power supply costs recoverable in rates during future years when the transaction with PECO would be taking place. Consumers filed a motion for clarification of the order relating to the PECO agreement, which is still pending. Due to uncertainties associated with electric industry restructuring legislation in Michigan, Consumers and PECO entered into an interim arrangement for the sale of 125 MW of PPA capacity and associated energy to PECO during 2000. Prices in the interim arrangement are identical to the March 1999 power sales agreement. Consumers is currently evaluating its options associated with the PECO agreement due to the recent electric restructuring legislation and related MPSC decisions.

Consumers recognized a loss in 1992 for the present value of the estimated future underrecoveries of power costs under the PPA based on MPSC recovery orders. At June 30, 2000 and June 30, 1999, the remaining after-tax present value of the estimated future PPA liability associated with the 1992 loss totaled $63 million and $96 million, respectively. The annual after-tax cash underrecoveries are based on the assumption that the MCV Facility would be available to generate electricity 91.5 percent of the time over its expected life. Historically the MCV Facility has operated above the 91.5 percent level. In March 1999, Consumers and the MCV Partnership reached an agreement effective January 1, 1999 that capped availability payments to the MCV Partnership at 98.5 percent. If the MCV Facility generates electricity at the maximum 98.5 percent level during the next five years, Consumers’ after-tax cash underrecoveries associated with the PPA could be as follows:


									In Millions

	2000		2001		2002		2003			2004

Estimated cash underrecoveries at 98.5%, net of tax	$	36	$	39	$	38	$	37		$	36

If the MCV Facility operates at availability levels above management’s 91.5 percent estimate made in 1992 for the remainder of the PPA, the estimated PPA liability would be deficient and Consumers will need to recognize additional operating expenses for current underrecoveries. For further discussion on the impact of the frozen PSCR, see “Electric Rate Matters” in this Note. Management continues to evaluate the adequacy of the contract loss liability considering actual MCV Facility operations, and resolution of the electric restructuring effort.

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In February 1998, the MCV Partnership filed a claim of appeal from the January 1998 and February 1998 MPSC orders related to electric utility industry restructuring. At the same time, the MCV Partnership filed suit in the United States District Court seeking a declaration that the MPSC’s failure to provide Consumers and the MCV Partnership a certain source of recovery of capacity payments after 2007 deprived the MCV Partnership of its rights under the Public Utilities Regulatory Policies Act of 1978. In July 1999, the United States District Court issued an order granting the MCV Partnership’s motion for summary judgment. The order permanently prohibits enforcement of the restructuring orders in any manner which denies any utility the ability to recover amounts paid to qualifying facilities such as the MCV Facility or which precludes the MCV Partnership from recovering the avoided cost rate. The MPSC appealed the United States District Court order. Consumers cannot predict the outcome of this litigation.

Nuclear Matters: In January 1997, the NRC issued its Systematic Assessment of Licensee Performance report for Palisades. The report rated all areas as good. The NRC suspended this assessment process for all licensees in 1998. Until the NRC completes its review of processes for assessing performance at nuclear power plants, the NRC uses the Plant Performance Review to provide an assessment of licensee performance. Palisades received its annual performance review dated March 31, 2000 in which the NRC stated that no significant performance issues existed during the assessment period in the reactor safety, radiation safety, and safeguards strategic performance areas. The NRC stated that Palisades continues to operate in a safe manner. Further, it stated that the NRC plans to conduct only routine inspections at Palisades over the next year. The NRC implemented the revised reactor oversight process industry-wide, including for Palisades, on April 2, 2000. As part of that process, Palisades submitted required NRC performance data in April 2000 that indicated that Consumers was within the limits of acceptable performance for which no NRC response is required.

Palisades’ temporary on-site storage pool for spent nuclear fuel is at capacity. Consequently, Consumers is using NRC-approved steel and concrete vaults, commonly known as “dry casks”, for temporary on-site storage. As of June 30, 2000, Consumers had loaded 18 dry storage casks with spent nuclear fuel at Palisades. Palisades will need to load more casks by 2004 in order to continue operation. Palisades only has three additional storage-only casks available for loading. Consumers anticipates, however, that licensed transportable casks will be available prior to 2004.

Consumers maintains insurance against property damage, debris removal, personal injury liability and other risks that are present at its nuclear facilities. Consumers also maintains coverage for replacement power costs during prolonged accidental outages at Palisades. Insurance would not cover such costs during the first 12 weeks of any outage, but would cover most of such costs during the next 52 weeks of the outage, followed by reduced coverage to 80 percent for 110 additional weeks. If certain covered losses occur at its own or other nuclear plants similarly insured, Consumers could be required to pay maximum assessments of $15.5 million in any one year to NEIL; $88 million per occurrence under the nuclear liability secondary financial protection program, limited to $10 million per occurrence in any year; and $6 million if nuclear workers claim bodily injury from radiation exposure. Consumers considers the possibility of these assessments to be remote.

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2000, Consumers submitted an analysis to the NRC that shows that the NRC’s screening criteria will not be reached until 2014. Accordingly, Consumers believes that with fuel management designed to minimize embrittlement, it can operate Palisades to the end of its license life in the year 2007 without annealing the reactor vessel. Nevertheless, Consumers will continue to monitor the matter.

In May 2000, Consumers requested that the NRC modify the operating license for the Palisades nuclear plant to recapture the four year construction period. This modification would extend the plant’s operation to March of 2011 and allow a full 40-year operating period, consistent with current NRC practice.

Nuclear Fuel Cost: Consumers amortizes nuclear fuel cost to fuel expense based on the quantity of heat produced for electric generation. Interest on leased nuclear fuel is expensed as incurred. Under current federal law, as confirmed by court decision, the DOE was to begin accepting deliveries of spent nuclear fuel for disposal by January 31, 1998. For fuel used after April 6, 1983, Consumers charges disposal costs to nuclear fuel expense, recovers them through electric rates, and then remits them to the DOE quarterly. Consumers elected to defer payment for disposal of spent nuclear fuel burned before April 7, 1983. At June 30, 2000, Consumers had a recorded liability to the DOE of $126 million, including interest, which is payable upon the first delivery of spent nuclear fuel to the DOE. Consumers recovered through electric rates the amount of this liability, excluding a portion of interest. In January 1997, in response to the DOE’s declaration that it would not begin to accept spent nuclear fuel deliveries in 1998, Consumers and other utilities filed suit in federal court. The court issued a decision in late 1997 affirming the DOE’s duty to take delivery of spent fuel, but was not specific as to the relief available for failure of the DOE to comply. Further litigation brought by Consumers and others in 1998, intended to produce specific relief for the DOE’s failure to comply, has not been successful to date. In April 2000, the U.S. Senate and House of Representatives approved federal legislation that would advance the cause of moving nuclear waste to a permanent repository. The President of the United States vetoed this legislation.

On July 20, 2000, the DOE announced that an agreement had been reached with a utility to address the DOE’s delay in accepting spent fuel. The DOE stated that the agreement, which is in the form of a contract amendment, is intended to be a framework that can be applied to all Nuclear Power Plants. Consumers is evaluating this matter further.

Consumers Gas Utility Contingencies

Gas Environmental Matters: Under the Michigan Natural Resources and Environmental Protection Act, Consumers expects that it will ultimately incur investigation and remedial action costs at a number of sites. These include 23 sites that formerly housed manufactured gas plant facilities, even those in which it has a partial or no current ownership interest. Consumers has completed initial investigations at the 23 sites. On sites where Consumers has received site-wide study plan approvals, it will continue to implement these plans. It will also work toward closure of environmental issues at sites as studies are completed. Consumers has estimated its costs related to further investigation and remedial action for all 23 sites using the Gas Research Institute-Manufactured Gas Plant Probabilistic Cost Model. Using this model, Consumers estimates the costs to be between $66 million and $118 million. These estimates are based on undiscounted 1999 costs. As of June 30, 2000, after consideration of prior years’ expenses, Consumers has a remaining accrued liability of $59 million and a regulatory asset of $64 million. Any significant change in assumptions, such as remediation techniques, nature and extent of contamination, and legal and regulatory requirements, could affect the estimate of remedial action costs for the sites. Consumers defers and amortizes, over a period of ten years, environmental clean-up costs above the amount currently being recovered in rates. Rate recognition of amortization expense cannot begin until after a prudence review in

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a future general gas rate case. Consumers is allowed current recovery of $1 million annually. Consumers has initiated lawsuits against certain insurance companies regarding coverage for some or all of the costs that it may incur for these sites.

Consumers Gas Utility Matters

Panhandle Matters

Regulatory Matters: Effective August 1996, Trunkline placed into effect a general rate increase, subject to refund. On September 16, 1999, Trunkline filed a FERC settlement agreement to resolve certain issues in this proceeding. FERC approved this settlement February 1, 2000 and required refunds of approximately $2 million which were made in April 2000, with supplemental refunds of $1.3 million in June 2000. On January 12, 2000, FERC issued an order on the remainder of the rate proceeding which, if approved

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without modification, would result in a substantial reduction to Trunkline’s tariff rates which would impact future revenues and require refunds. Trunkline has requested rehearing of certain matters in this order.

In conjunction with a FERC order issued in September 1997, FERC required certain natural gas producers to refund previously collected Kansas ad-valorem taxes to interstate natural gas pipelines. FERC ordered these pipelines to refund these amounts to their customers. The pipelines must make all payments in compliance with prescribed FERC requirements. At June 30, 2000 and December 31, 1999, Accounts Receivable included $56 million and $54 million, respectively, due from natural gas producers, and Other Current Liabilities included $56 million and $54 million, respectively, for related obligations.

Environmental Matters: Panhandle is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Panhandle has identified environmental contamination at certain sites on its systems and has undertaken clean-up programs at these sites. The contamination resulted from the past use of lubricants in compressed air systems containing PCBs and the prior use of wastewater collection facilities and other on-site disposal areas. Under the terms of the sale of Panhandle to CMS Energy, a subsidiary of Duke Energy is obligated to complete the Panhandle clean-up programs at certain agreed-upon sites and to indemnify against certain future environmental litigation and claims. The Illinois EPA included Panhandle and Trunkline, together with other non-affiliated parties, in a cleanup of former waste oil disposal sites in Illinois. Prior to a partial cleanup by the United States EPA, a preliminary study estimated the cleanup costs at one of the sites to be between $5 million and $15 million. The State of Illinois contends that Panhandle Eastern Pipe Line Company’s and Trunkline’s share for the costs of assessment and remediation of the sites, based on the volume of waste sent to the facilities, is 17.32 percent. Management believes that the costs of cleanup, if any, will not have a material adverse impact on Panhandle’s financial position, liquidity, or results of operations.

Other Uncertainties

CMS Generation – Loy Yang: At June 30, 2000, CMS Energy has an approximately $500 million investment in Loy Yang. In February 2000, CMS Energy announced its intention to sell its 50 percent interest in Loy Yang. The amount CMS Energy ultimately realizes from the sale of Loy Yang could differ materially in the near term from the amount currently reflected as an asset on the balance sheet.

CMS Generation Environmental Matters: CMS Generation does not currently expect to incur significant capital costs at its power facilities for compliance with current environmental regulatory standards.

Capital Expenditures: CMS Energy estimates capital expenditures, including investments in unconsolidated subsidiaries and new lease commitments, of $1.65 billion for 2000, $1.37 billion for 2001, and $1.36 billion for 2002. For further information, see Capital Resources and Liquidity-Capital Expenditures in the MD&A.

Other: As of June 30, 2000, CMS Energy and Enterprises guaranteed up to $605 million in contingent obligations of unconsolidated affiliates and related parties.

In March 2000, Adams Affiliates, Inc. and Cottonwood Partnership (prior majority owners of Continental Natural Gas) initiated arbitration proceedings through the American Arbitration Association against CMS Energy. The plaintiffs claim, in connection with an Agreement and Plan of Merger among CMS Energy, CMS Merging Corporation, Continental Natural Gas and the plaintiffs, damages for breach of warranty,

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implied duty of good faith, violation of the Michigan Uniform Securities Act, and common law fraud and negligent misrepresentation. The plaintiffs allege $13 million of compensatory damages and $26 million in exemplary damages. CMS Energy filed a response denying all the claims made by the plaintiffs and asserting several counterclaims. CMS Energy believes this lawsuit is without merit and will vigorously defend against it, but cannot predict the outcome of this matter.

In addition to the matters disclosed in this Note, Consumers and certain other subsidiaries of CMS Energy are parties to certain lawsuits and administrative proceedings before various courts and governmental agencies arising from the ordinary course of business. These lawsuits and proceedings may involve personal injury, property damage, contractual matters, environmental issues, federal and state taxes, rates, licensing and other matters.

CMS Energy has accrued estimated losses for certain contingencies discussed in this Note. Resolution of these contingencies is not expected to have a material adverse impact on CMS Energy’s financial position, liquidity, or results of operations.

3: Short-Term and Long-Term Financings, and Capitalization

CMS Energy: CMS Energy’s Senior Credit Facility consists of a $1 billion one-year revolving credit facility maturing in June 2001. Additionally, CMS Energy has unsecured lines of credit in an aggregate amount of $38 million. As of June 30, 2000, the total amount utilized under the Senior Credit Facility and the unsecured lines of credit were $730 million and $14 million, respectively, and the amounts available under the Senior Credit Facility and the unsecured lines of credit were $270 million and $24 million, respectively.

At June 30, 2000, CMS Energy had $111 million of Series A GTNs, $107 million of Series B GTNs, $130 million of Series C GTNs, $199 million Series D GTNs, and $340 million Series E GTNs issued and outstanding with weighted average interest rates of 7.9 percent, 8.1 percent, 7.9 percent, 7.0 percent and 7.7 percent, respectively.

In February 2000, the Board of Directors approved a stock repurchase program whereby CMS Energy could reacquire up to 10 million shares of CMS Energy Common Stock. As of June 30, 2000, CMS Energy had reacquired approximately 6.6 million shares.

CMS Energy is currently implementing a financial plan to strengthen its balance sheet, reduce fixed expenses and enhance earnings per share growth. In conjunction with this plan, CMS Energy has identified for possible sale certain non-strategic assets which are expected to contribute little or no earnings benefits in the short to medium term. In addition, this plan will allow CMS Energy to achieve more geographic and business focus, thereby allowing CMS Energy to concentrate on its most profitable and growing ventures. From December 1999 through June 30, 2000, CMS Energy has received $664 million of proceeds from the sale of these assets, including a partial interest in its Northern Header gathering system, all of its ownership interest in a Brazilian distribution system, all of its northern Michigan oil and gas properties, its ownership interest in the Lakewood Cogeneration plant located in Lakewood, New Jersey, and all of its ownership interest in certain oil reserves located in Ecuador.

Consumers: At July 1, 2000, Consumers had FERC authorization to issue or guarantee through June 2002, up to $900 million of short-term securities outstanding at any one time. Consumers also had remaining

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FERC authorization to issue through June 2002 up to $250 million and $800 million of long-term securities with maturities up to 30 years for refinancing purposes and for general corporate purposes, respectively.

Consumers has an unsecured $300 million credit facility and unsecured lines of credit aggregating $145 million. These facilities are available to finance seasonal working capital requirements and to pay for capital expenditures between long-term financings. At June 30, 2000, a total of $275 million was outstanding at a weighted average interest rate of 7.8 percent, compared with $264 million outstanding at June 30, 1999, at a weighted average interest rate of 6.1 percent.

Consumers currently has in place a $325 million trade receivables sale program. At June 30, 2000 and 1999, receivables sold under the program totaled $283 million and $266 million, respectively. Accounts receivable and accrued revenue in the Consolidated Balance Sheets have been reduced to reflect receivables sold.

Under the provisions of its Articles of Incorporation, Consumers had $360 million of unrestricted retained earnings available to pay common dividends at June 30, 2000. In January 2000, Consumers declared and paid a $79 million common dividend, in April 2000, Consumers declared a $30 million common dividend which was paid in May 2000. In July 2000, Consumers declared a $17 million common dividend payable in August 2000.

Panhandle: In March 2000, Panhandle received net proceeds of $99 million from the sale of $100 million 8.25 percent senior notes, due April 2010. Proceeds from this offering were used to fund the acquisition of Sea Robin, a 1 bcf per day natural gas and condensate pipeline in the Gulf of Mexico offshore Louisiana west of Trunkline’s existing Terrebonne system.

CMS Oil and Gas: CMS Oil and Gas has a three-year $225 million floating rate revolving credit facility which matures in May 2002. At June 30, 2000, the amount utilized under the credit facility was $15 million.

4: Earnings Per Share and Dividends

On October 25, 1999, CMS Energy exchanged approximately 6.1 million shares of CMS Energy Common Stock for all of the approximately 8.7 million issued and outstanding shares of Class G Common Stock in a tax-free exchange for United States federal income tax purposes.

Earnings per share attributable to Common Stock for the three and six months ended June 30, 1999 reflect the performance of Consumers Gas Group. The allocation of earnings attributable to each class of Common Stock and the related amounts per share are computed by considering the weighted average number of shares outstanding.

Earnings attributable to the Outstanding Shares are equal to Consumers Gas Group net income multiplied by a fraction; the numerator is the weighted average number of Outstanding Shares during the period and the denominator is the weighted average number of Outstanding Shares and authorized but unissued shares of Class G Common Stock not held by holders of the Outstanding Shares during the period.

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Computation of EPS:


								In Millions, Except Per Share Amounts

				Three Months					Six Months
				Ended June 30,					Ended June 30,

				2000			1999		2000			1999

Net Income Applicable to Basic and Diluted EPS




Consolidated Net Income				$	81		$	75	$	161		$	173

Net Income Attributable to Common Stocks:




CMS Energy — Basic EPS				$	81			74		161			162




Add conversion of 7.75% Trust Preferred Securities (net of tax)					2			2		4			4

CMS Energy — Diluted EPS				$	83		$	76	$	165		$	166

Class G:




	Basic and Diluted EPS			$	—	(a)	$	1	$	—	(a)	$	11

Average Common Shares Outstanding




	Applicable to Basic and Diluted EPS




	CMS Energy:




		Average Shares — Basic			110.1			108.7		111.8			108.5




		Add conversion of 7.75% Trust Preferred Securities			4.2			4.2		4.2			4.2




		Options-Treasury Shares			.1			.4		.1			.4

		Average Shares — Diluted			114.4			113.3		116.1			113.1

	Class G:




		Average Shares Basic and Diluted			—	(a)		8.6		—	(a)		8.5

Earnings Per Average Common Share




	CMS Energy:




			Basic	$	.73		$	.68	$	1.44		$	1.50




			Diluted	$	.72		$	.67	$	1.42		$	1.48




	Class G:




			Basic and Diluted	$	—	(a)	$	.10	$	—	(a)	$	1.28

(a)

All of the outstanding shares of Class G Common Stock were exchanged for CMS Energy Common Stock on October 25, 1999.

In February and May 2000, CMS Energy paid dividends of $.365 per share on CMS Energy Common Stock. In July 2000, the Board of Directors declared a quarterly dividend of $.365 per share on CMS Energy Common Stock, payable in August 2000.

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5: Risk Management Activities and Derivatives Transactions

CMS Energy and its subsidiaries use a variety of derivative instruments (derivatives), including futures contracts, swaps, options and forward contracts, to manage exposure to fluctuations in commodity prices, interest rates and foreign exchange rates. To qualify for hedge accounting, derivatives must meet the following criteria: i) the item to be hedged exposes the enterprise to price, interest or exchange rate risk; and ii) the derivative reduces that exposure and is designated as a hedge.

Derivative instruments contain credit risk if the counterparties, including financial institutions and energy marketers, fail to perform under the agreements. CMS Energy minimizes such risk by performing financial credit reviews using, among other things, publicly available credit ratings of such counterparties. Nonperformance by counterparties is not expected to have a material adverse impact on CMS Energy’s financial position, liquidity, or results of operations.

Commodity Price Hedges: CMS Energy engages in both energy trading and non-trading activities as defined by EITF 98-10, Accounting for Energy Trading and Risk Management Activities. CMS Energy accounts for its non-trading commodity price derivatives as hedges and, as such, defers any changes in market value and gains and losses resulting from settlements until the hedged transaction is complete. If there was a material lack of correlation between the changes in the market value of the commodity price contracts and the market price ultimately received for the hedged item, open commodity price contracts would be marked-to-market and gains and losses would be recognized in the income statement currently. Consumers enters into electric option contracts to ensure a reliable source of capacity to meet its customers’ electric requirements and to limit its risk associated with electricity price increases. It is management’s intent to take physical delivery of the commodity. Consumers continuously evaluates its daily capacity needs and sells the option contracts, if marketable, when it has excess daily capacity. Consumers’ maximum exposure associated with these options is limited to the price paid.

A CMS Energy subsidiary has a swap agreement which fixes the prices that it will pay for gas sold to the MCV Facility for the years 2001 through 2006. The subsidiary pays fixed prices and receives floating prices under the agreement. The settlement periods are each a one-year period ending December 31, 2001 through 2006 on 3.65 million MMBtu. At June 30, 2000, the agreement has been classified as a trading activity and correspondingly, has been marked-to-market.

Interest Rate Hedges: CMS Energy and some of its subsidiaries enter into interest rate swap agreements to exchange variable rate interest payment obligations to fixed rate obligations without exchanging the underlying notional amounts. These agreements convert variable rate debt to fixed rate debt to reduce the impact of interest rate fluctuations. The notional amounts parallel the underlying debt levels and are used to measure interest to be paid or received and do not re present the exposure to credit loss. The notional amount of CMS Energy’s and its subsidiaries’ interest rate swaps was $1.9 billion at June 30, 2000. The difference between the amounts paid and received under the swaps is accrued and recorded as an adjustment to interest expense over the life of the hedged agreement.

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Foreign Exchange Hedges: CMS Energy uses forward exchange and option contracts to hedge certain receivables, payables, long-term debt and equity value relating to foreign investments. The purpose of CMS Energy’s foreign currency hedging activities is to protect the company from the risk that U.S. dollar net cash flows resulting from sales to foreign customers and purchases from foreign suppliers and the repayment of non-U.S. dollar borrowings as well as equity reported on the company’s balance sheet, may be adversely affected by changes in exchange rates. These contracts do not subject CMS Energy to risk from exchange rate movements because gains and losses on such contracts offset losses and gains, respectively, on assets and liabilities being hedged. The notional amount of the outstanding foreign exchange contracts was $370 million at June 30, 2000, which includes $25 million, $150 million and $195 million for Australian, Brazilian and Argentine foreign exchange contracts, respectively. The estimated fair value of the foreign exchange and option contracts at June 30, 2000 was $18 million, representing the amount CMS Energy would pay upon settlement.

6: Reportable Segments

CMS Energy operates principally in the following six reportable segments: electric utility; gas utility; independent power production; oil and gas exploration and production; natural gas transmission, storage and processing; and energy marketing, services and trading.

The electric utility segment consists of regulated activities associated with the generation, transmission and distribution of electricity in the state of Michigan. The gas utility segment consists of regulated activities associated with the transportation, storage and distribution of natural gas in the state of Michigan. The other reportable segments consist of the development and management of electric, gas and other energy-related projects in the United States and internationally, including energy trading and marketing. CMS Energy’s reportable segments are strategic business units organized and managed by the nature of the products and services each provides. The accounting policies of each reportable segment are the same as those described in the summary of significant accounting policies. CMS Energy’s management evaluates performance based on pretax operating income. Intersegment sales and transfers are accounted for at current market prices and are eliminated in consolidated pretax operating income by segment.

The Consolidated Statements of Income show operating revenue and pretax operating income by reportable segment. Revenues from an international energy distribution business and a land development business fall below the quantitative thresholds for reporting. Neither of these segments has ever met any of the quantitative thresholds for determining reportable segments.

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Report of Independent Public Accountants

To CMS Energy Corporation:

We have reviewed the accompanying consolidated balance sheets of CMS ENERGY CORPORATION (a Michigan corporation) and subsidiaries as of June 30, 2000 and 1999, the related consolidated statements of income and common stockholders’ equity for the three-month and six-month periods then ended and the related consolidated statements of cash flows for the six-month periods then ended. 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 procedures to financial data and 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, 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 the financial statements referred to above for them to be in conformity with accounting principles generally accepted in the United States.

We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of CMS Energy Corporation and subsidiaries as of December 31, 1999, and, in our report dated February 4, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Arthur Andersen LLP

Detroit, Michigan,
July 28, 2000.

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Consumers Energy Company
Management’s Discussion and Analysis

Consumers is a combination electric and gas utility company serving the Lower Peninsula of Michigan and is a subsidiary of CMS Energy, a holding company. Consumers’ customer base includes a mix of residential, commercial and diversified industrial customers, the largest segment of which is the automotive industry.

The MD&A of this Form 10-Q should be read along with the MD&A and other parts of Consumers’ 1999 Form 10-K. This MD&A also refers to, and in some sections specifically incorporates by reference, Consumers’ Condensed Notes to Consolidated Financial Statements and should be read in conjunction with such Statements and Notes.

This report and other written and oral statements made by Consumers from time to time contain forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” and “plans,” and variations of such words and similar expressions, are intended to identify forward-looking statements that involve risk and uncertainty. These forward-looking statements are subject to various factors that could cause Consumers’ actual results to differ materially from those anticipated in such statements. Consumers disclaims any obligation to update or revise forward-looking statements, whether from new information, future events or otherwise. Consumers details certain risk factors, uncertainties and assumptions in this MD&A and particularly in the section entitled “CMS Energy, Consumers and Panhandle Forward-Looking Statements Cautionary Factors” in Consumers’ 1999 Form 10-K Item 1 and periodically in various public filings it makes with the SEC. This discussion of potential risks and uncertainties is by no means complete, but is designed to highlight important factors that may impact Consumers’ outlook. This report also describes material contingencies in Consumers’ Condensed Notes to Consolidated Financial Statements and readers are encouraged to read such Notes.

Results of Operations

Consumers Consolidated Earnings


					In Millions

June 30	2000		1999		Change

Three months ended	$	24	$	68	$	(44	)




Six months ended		109		177		(68	)

Net income available to the common stockholder decreased $44 million from the 1999 level for the three months ended June 30, 2000. The earnings decrease was primarily due to lower gas and electric revenues and higher gas commodity costs and higher electric power costs not all of which are being collected in customer rates. The earnings decrease primarily reflects the establishment of a $45 million regulatory obligation related to the impact of sharply higher gas prices above the frozen gas customer rate. In addition, earnings decreased by $5 million due to the state of Michigan passing legislation codifying electric customer choice which required an immediate five percent electric rate reduction for residential customers, while commercial and industrial rates remain unchanged. Net income for the six months ended June 30, 2000 decreased $68 million from the comparable period in 1999 also as the result of increased gas costs referenced above. The earnings decrease was also due to lower gas deliveries, higher electric power costs, and the required electric rate reduction totaling $5 million resulting from the customer choice legislation enacted in Michigan, partially offset by increased electric sales to customers. For further information, see the Electric and Gas Utility Results of Operations sections and Note 2, Uncertainties.

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ELECTRIC UTILITY RESULTS OF OPERATIONS

Electric Pretax Operating Income:


					In Millions

June 30	2000		1999		Change

Three months ended	$	109	$	122	$	(13	)




Six months ended		224		256		(32	)

For the three months ended June 30, 2000, electric pretax operating income decreased $13 million from the comparable period in 1999. The earnings decrease reflects increased power costs not totally recoverable from customers, the 5 percent residential customer rate reduction resulting from the Customer Choice and Electricity Reliability Act, and increased operating expenses. For the six months ended June 30, 2000, electric pretax operating income decreased $32 million from the comparable period in 1999. The earnings decrease also reflects the increased cost of purchased power and the impact of the electric rate reduction partially offset by increased electric sales to customers. Due to changes in regulation, since 1998 differences in power supply costs now impact Consumers’ earnings. In the past, such cost changes did not impact electric pretax operating income because Consumers passed the cost of electric power on to electric customers. During the current year, Consumers needed additional purchased electric power to meet customer requirements due to scheduled and unscheduled outages at Consumers’ internal generators. The following table quantifies these impacts on pretax operating income:


				In Millions

	Three Months			Six Months
	Ended June 30			Ended June 30

Change Compared to Prior Year	2000 vs 1999			2000 vs 1999

Electric deliveries	$	4		$	12




Power supply costs and related revenue		(3	)		(25	)




Rate decrease		(5	)		(5	)




Non-commodity revenue		(2	)		(5	)




Operation and maintenance expense		(8	)		(8	)




General taxes and depreciation expense		1			(1	)

Total change	$	(13	)	$	(32	)

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Power Supply Costs:


			In Millions

June 30	2000		1999		Change

Three months ended	$	294	$	293	$	1




Six months ended		594		571		23

Power supply costs were essentially unchanged for the three month ended June 30, 2000 from the comparable period in 1999 but increased for the six month period, primarily due to higher interchange power costs. Consumers had to purchase more external power because internal generation decreased due to scheduled and unscheduled outages.

GAS UTILITY RESULTS OF OPERATIONS

Gas Pretax Operating Income:


						In Millions

June 30	2000			1999		Change

Three months ended	$	(28	)	$	16	$	(44	)




Six months ended	$	35		$	94	$	(59	)

Gas pretax operating income decreased in the three months ended June 30, 2000 by $44 million. The earnings decrease primarily reflects sharply higher gas prices in 2000 and the establishment of a $45 million regulatory obligation related to the higher prices above the frozen gas customer rate. These decreases are partially offset by higher gas deliveries due to cooler temperatures in the three months ended June 30, 2000. Gas pretax operating income decreased in the six months ended June 30, 2000 by $59 million. The earnings decrease primarily reflects decreased gas deliveries in the six months ended June 30, 2000 due to warmer temperatures during the heating season and the higher gas prices purchased for the next heating season as described for the three month period. Due to a temporary change in regulation, differences in gas costs directly impact Consumers’ earnings. This change in regulation relates to the gas industry restructuring initiatives, which provide Consumers the opportunity to temporarily benefit or lose from changes in commodity gas prices. See Note 2, Uncertainties, “Gas Rate Matters — Gas Restructuring”, for more detailed information on this matter. The following table quantifies these impacts on Pretax Operating Income.


				In Millions

	Three Months			Six Months
	Ended June 30			Ended June 30

Change Compared to Prior Year	2000 vs 1999			2000 vs 1999

Gas deliveries	$	4		$	(6	)




Gas commodity costs and related revenue		(50	)		(61	)




Gas wholesale and retail services		2			4




Operation and maintenance expense		1			3




General taxes and depreciation expense		(1	)		1

Total change	$	(44	)	$	(59	)

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reflect cooler temperatures during the second quarter of 2000. Gas system deliveries for the six months ended

June 30, 2000, including miscellaneous transportation totaled 227 bcf, a decrease of 1 bcf or .5 percent compared with 1999.

Cost of Gas Sold:


					In Millions

June 30	2000		1999		Change

Three months ended	$	95	$	78	$	17




Six months ended	$	390	$	384	$	6

Capital Resources and Liquidity

CASH POSITION, INVESTING AND FINANCING

Operating Activities: Consumers derives cash from operating activities from the sale and transportation of natural gas and from the generation, transmission, distribution and sale of electricity. Cash from operations totaled $367 million and $460 million for the first six months of 2000 and 1999, respectively. The $93 million decrease was primarily due to lower gas and electric revenues, and higher gas commodity and electric power costs as discussed in the results of operations. Included in net income but which had no effect on cash flow was the recognition of a $45 million regulatory obligation ($30 million after tax) related to the impact of sharply higher gas prices above the frozen gas customer rate. The decrease in cash was also affected by other temporary changes in working capital items due to timing of cash receipts and payments. Consumers primarily uses cash derived from operating activities to maintain and expand electric and gas systems, to retire portions of long-term debt, and to pay dividends.

Investing Activities: Cash used for investing activities totaled $293 million and $238 million for the first six months of 2000 and 1999, respectively. The change of $55 million is primarily the result of a $41 million increase in capital expenditures and the absence of $7 million of proceeds from the FMLP.

Financing Activities: Cash used in financing activities totaled $82 million and $218 million for the first six months of 2000 and 1999, respectively. The change of $136 million is primarily the result of the absence of $200 million retirement of preferred stock and the absence of $150 million contribution from Consumers’ common stockholder. The change was also affected by a $65 million reduction in the payment of common stock dividends.

Other Investing and Financing Matters: Consumers has credit facilities, lines of credit and a trade receivable sale program in place as anticipated sources of funds to fulfill its currently expected capital expenditures. For detailed information about these sources of funds, see Note 3, Short-Term Financing and Capitalization.

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Outlook

CAPITAL EXPENDITURES OUTLOOK

Consumers estimates the following capital expenditures, including new lease commitments, by expenditure type and by business segments over the next three years. These estimates are prepared for planning purposes and are subject to revision.


					In Millions

Years Ended December 31	2000		2001		2002

Construction	$	528	$	669	$	639




Nuclear fuel lease		3		26		26




Capital leases other than nuclear fuel		24		25		25

	$	555	$	720	$	690

Electric utility operations (a)(b)	$	438	$	580	$	545




Gas utility operations (a)		117		140		145

	$	555	$	720	$	690

(a)		These amounts include an attributed portion of Consumers’ anticipated capital expenditures for plant and equipment common to both the electric and gas utility businesses.




(b)		These amounts include estimates for capital expenditures possibly required for compliance with recently revised national air quality standards under the Clean Air Act. For further information see Note 2, Uncertainties.

ELECTRIC BUSINESS OUTLOOK

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For further information and material changes relating to the rate matters and restructuring of the electric utility industry, see Note 1, Corporate Structure and Summary of Significant Accounting Policies, and Note 2, Uncertainties, “Electric Rate Matters – Electric Restructuring” and “Electric Rate Matters – Electric Proceedings,” incorporated by reference herein.

Uncertainties: Several electric business trends or uncertainties may affect Consumers’ financial results and condition. These trends or uncertainties have, or Consumers reasonably expects could have, a material impact on net sales, revenues, or income from continuing electric operations. Such trends and uncertainties include: 1) capital expenditures for compliance with the Clean Air Act; 2) environmental liabilities arising from compliance with various federal, state and local environmental laws and regulations, including potential liability or expenses relating to the Michigan Natural Resources and Environmental Protection Act and Superfund; 3) electric industry restructuring, including the ability to offset the 5 percent reduction in residential rates with savings from Securitization and the ability to recover Stranded Costs; 4) the ability to meet peak electric demand loads at a reasonable cost and without market disruption and initiatives undertaken to reduce exposure to energy price increases; and 5) ongoing issues relating to the storage of spent nuclear fuel and the operating life of Palisades. For detailed information about these trends or uncertainties, see Note 2, Uncertainties, incorporated by reference herein.

GAS BUSINESS OUTLOOK

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Uncertainties: Consumers’ financial results and position may be affected by a number of trends or uncertainties that have, or Consumers reasonably expects could have, a material impact on net sales or revenues or income from continuing gas operations. Such trends and uncertainties include: 1) potential environmental costs at a number of sites, including sites formerly housing manufactured gas plant facilities; 2) a statewide experimental gas industry restructuring program; 3) permanent gas industry restructuring; and 4) implementation of a suspended GCR and the success or failure of initiatives undertaken to protect against gas commodity price increases.

OTHER OUTLOOK

Other Matters

NEW ACCOUNTING STANDARDS

In 1999, the FASB issued SFAS 137, Accounting for Derivative Instruments and Hedging Activities – Deferral of the Effective Date of FASB Statement No. 133. In June 2000, the FASB also issued SFAS 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133. SFAS 137 defers the effective date of SFAS 133, Accounting for Derivative Instruments and Hedging Activities to January 1, 2001, and SFAS 138 clarifies certain issues pertaining to SFAS 133. Consumers will adopt SFAS 133 on January 1, 2001 and is currently analyzing the effects of adoption on its financial statements.

DERIVATIVES AND HEDGES

Market Risk Information: Consumers’ exposure to market risk sensitive instruments and positions include, but are not limited to, changes in interest rates, debt prices and equity prices in which Consumers holds less than a 20 percent interest. In accordance with the SEC’s disclosure requirements, Consumers performed a 10 percent sensitivity analysis on its derivative and non-derivative financial instruments. The analysis measures the change in the net present values based on a hypothetical 10 percent adverse change in the market rates to determine the potential loss in fair values, cash flows and earnings. Losses in excess of the amounts determined could occur if market rates or prices exceed the 10 percent change used for the analysis. Management does not believe that a sensitivity analysis alone provides an accurate or reliable method for monitoring and controlling risk. Therefore, Consumers relies on the experience and judgment of senior management to revise strategies and adjust positions, as they deem necessary.

For purposes of the analysis below, Consumers has not quantified short-term exposures to hypothetically adverse changes in the price or nominal amounts associated with inventories or trade receivables and payables. Furthermore, Consumers enters into all derivative financial instruments for purposes other than trading. In the case of hedges, management believes that gains or losses incurred on derivative instruments used as a hedge would be offset by the opposite movement of the underlying hedged item.

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Equity Security Price Risk: Consumers has equity investments in companies in which it holds less than a 20 percent interest in the entity. A hypothetical 10 percent adverse change in market price would result in a $9 million change in its investment and equity since this equity instrument is currently marked-to-market through equity. Consumers believes that such an adverse change would not have a material effect on its consolidated financial position, results of operation or cash flows.

Debt Price and Interest Rate Risk: Management uses a combination of fixed-rate and variable-rate debt to reduce interest rate exposure. Interest rate swaps and rate locks may be used to adjust exposure when deemed appropriate, based upon market conditions. These strategies attempt to provide and maintain the lowest cost of capital.

As of June 30, 2000, Consumers had outstanding $975 million of variable-rate debt. Assuming a hypothetical 10 percent adverse change in market interest rates, Consumers’ exposure to earnings is limited to $7 million. As of June 30, 2000, Consumers has outstanding long-term fixed-rate debt of $2.061 billion with a fair value of $1.934 billion. Assuming a hypothetical 10 percent adverse change in market rates, Consumers would have an exposure of $130 million to its fair value if it had to refinance all of its long-term fixed-rate debt. Consumers believes that any adverse change in debt price and interest rates would not have a material effect on its consolidated financial position, results of operation or cash flows.

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Consumers Energy Company
Consolidated Statements of Income
(Unaudited)


			Three Months Ended						Six Months Ended

June 30			2000			1999			2000			1999

												In Millions

Operating Revenue




	Electric		$	647		$	663		$	1,287		$	1,299




	Gas			148			175			623			681




	Other			13			12			24			27

				808			850			1,934			2,007

Operating Expenses




	Operation




		Fuel for electric generation		85			88			146			164




		Purchased power — related parties		143			139			290			278




		Purchased and interchange power		66			66			158			129




		Cost of gas sold		95			78			390			384




		Other		146			152			264			281

				535			523			1,248			1,236




	Maintenance			44			41			92			79




	Depreciation, depletion and amortization			93			92			216			213




	General taxes			44			45			99			103

				716			701			1,655			1,631

Pretax Operating Income




	Electric			109			122			224			256




	Gas			(28	)		16			35			94




	Other			11			11			20			26

				92			149			279			376

Other Income (Deductions)




	Dividends and interest from affiliates			2			3			5			6




	Accretion income			1			1			1			2




	Accretion expense			(2	)		(4	)		(4	)		(7	)




	Other, net			1			7			3			8

				2			7			5			9

Interest Charges




	Interest on long-term debt			35			35			69			70




	Other interest			10			9			18			17

				45			44			87			87

Net Income Before Income Taxes				49			112			197			298




Income Taxes				16			39			69			107

Net Income				33			73			128			191




Preferred Stock Dividends				—			—			1			5




Preferred Securities Distributions				9			5			18			9

Net Income Available to Common Stockholder			$	24		$	68		$	109		$	177

The accompanying condensed notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Statements of Cash Flows
(Unaudited)


				Six Months Ended

June 30				2000			1999

							In Millions

Cash Flows from Operating Activities




	Net income			$	128		$	191




		Adjustments to reconcile net income to net cash provided by operating activities Depreciation, depletion and amortization (includes nuclear decommissioning of $19 and $24 respectively)			216			213




			Capital lease and other amortization		15			20




			Accretion expense		4			7




			Accretion income — abandoned Midland project		(1	)		(2	)




			Undistributed earnings of related parties		(21	)		(27	)




			Deferred income taxes and investment tax credit		(22	)		6




			MCV power purchases		(28	)		(28	)




			Regulatory obligation – gas choice		45			—




			Changes in other assets and liabilities		31			80

			Net cash provided by operating activities		367			460

Cash Flows from Investing Activities




	Capital expenditures (excludes assets placed under capital lease)				(233	)		(192	)




	Cost to retire property, net				(45	)		(39	)




	Investments in nuclear decommissioning trust funds				(19	)		(24	)




	Investment in Electric Restructuring Implementation Plan				(13	)		(11	)




	Proceeds from nuclear decommissioning trust funds				17			21




	Proceeds from FMLP				—			7

			Net cash used in investing activities		(293	)		(238	)

Cash Flows from Financing Activities




	Payment of common stock dividends				(109	)		(173	)




	Preferred securities distributions				(18	)		(9	)




	Payment of capital lease obligations				(14	)		(18	)




	Payment of preferred stock dividends				(1	)		(9	)




	Retirement of bonds and other long-term debt				(1	)		(23	)




	Increase (decrease) in notes payable, net				61			49




	Retirement of preferred stock				—			(200	)




	Contribution from (return of equity to) stockholder				—			150




	Proceeds from bank loans				—			15

			Net cash provided by (used in) financing activities		(82	)		(218	)

Net Increase (Decrease) in Cash and Temporary Cash Investments					(8	)		4




Cash and Temporary Cash Investments, Beginning of Period					18			25

Cash and Temporary Cash Investments, End of Period				$	10		$	29

Other cash flow activities and non-cash investing and financing activities were:




Cash transactions




	Interest paid (net of amounts capitalized)			$	78		$	82




	Income taxes paid (net of refunds)				76			95




Non-cash transactions




	Nuclear fuel placed under capital lease			$	3		$	(2	)




	Other assets placed under capital leases				7			7

All highly liquid investments with an original maturity of three months or less are considered cash equivalents.

The accompanying condensed notes are an integral part of these statements.

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Consumers Energy Company
Consolidated Balance Sheets


ASSETS			June 30				June 30
			2000		December 31		1999
			(Unaudited)		1999		(Unaudited)

							In Millions

Plant (At original cost)




	Electric		$	7,073	$	6,981	$	6,832




	Gas			2,497		2,461		2,394




	Other			25		25		25

				9,595		9,467		9,251




	Less accumulated depreciation, depletion and amortization			5,776		5,643		5,493

				3,819		3,824		3,758




	Construction work-in-progress			297		199		171

				4,116		4,023		3,929

Investments




	Stock of affiliates			111		139		222




	First Midland Limited Partnership			246		240		238




	Midland Cogeneration Venture Limited Partnership			261		247		230

				618		626		690

Current Assets




	Cash and temporary cash investments at cost, which approximates market			10		18		29




	Accounts receivable and accrued revenue, less allowances of $3, $4 and $4, respectively			36		98		102




	Accounts receivable — related parties			70		67		59




	Inventories at average cost




		Gas in underground storage		153		216		166




		Materials and supplies		64		62		51




		Generating plant fuel stock		48		46		32




	Postretirement benefits			25		25		25




	Deferred income taxes			—		8		—




	Prepaid property taxes and other			112		159		82

				518		699		546

Non-current Assets




	Regulatory assets




		Unamortized nuclear costs		490		519		521




		Postretirement benefits		325		341		356




		Abandoned Midland Project		35		48		60




		Other		119		125		116




	Nuclear decommissioning trust funds			612		602		581




	Other			205		187		206

				1,786		1,822		1,840

Total Assets			$	7,038	$	7,170	$	7,005

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STOCKHOLDERS' INVESTMENT AND LIABILITIES			June 30				June 30
			2000		December 31		1999
			(Unaudited)		1999		(Unaudited)

							In Millions

Capitalization




	Common stockholder’s equity




		Common stock	$	841	$	841	$	841




		Paid-in capital		645		645		645




		Revaluation capital		19		37		57




		Retained earnings since December 31, 1992		485		485		438

				1,990		2,008		1,981




	Preferred stock			44		44		44




	Company-obligated mandatorily redeemable preferred securities of:




		Consumers Power Company Financing I (a)		100		100		100




		Consumers Energy Company Financing II (a)		120		120		120




		Consumers Energy Company Financing III (a)		175		175		—




	Long-term debt			2,008		2,006		2,008




	Non-current portion of capital leases			85		85		88

				4,522		4,538		4,341

Current Liabilities




	Current portion of long-term debt and capital leases			86		90		148




	Notes payable			275		214		264




	Accounts payable			175		224		157




	Accrued taxes			161		232		160




	Accounts payable — related parties			69		82		82




	Power purchases – MCV Partnership			47		47		47




	Accrued interest			41		37		35




	Deferred income taxes			1		—		9




	Accrued refunds			—		11		14




	Other			126		139		151

				981		1,076		1,067

Non-current Liabilities




	Deferred income taxes			646		700		641




	Postretirement benefits			402		420		436




	Power purchases – MCV Partnership			50		73		101




	Deferred investment tax credit			121		125		129




	Regulatory liabilities for income taxes, net			82		64		115




	Other			234		174		175

				1,535		1,556		1,597

Commitments and Contingencies (Notes 1 and 2)




Total Stockholders’ Investment and Liabilities			$	7,038	$	7,170	$	7,005

(a) The primary asset of Consumers Power Company Financing I is $103 million principal amount of 8.36% subordinated deferrable interest notes due 2015 from Consumers. The primary asset of Consumers Energy Company Financing II is $124 million principal amount of 8.20% subordinated deferrable interest notes due 2027 from Consumers. The primary asset of Consumers Energy Company Financing III is $180 million principal amount of 9.25% subordinated deferrable interest notes due 2029 from Consumers. For further discussion, see Note 3 contained in Consumers’ 1999 Form 10-K.

The accompanying condensed notes are an integral part of these Balance Sheets.

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Consumers Energy Company
Consolidated Statements of Common Stockholder’s Equity
(Unaudited)


			Three Months Ended						Six Months Ended

June 30			2000			1999			2000			1999

												In Millions

Common Stock




	At beginning and end of period		$	841		$	841		$	841		$	841

Other Paid-in Capital




	At beginning of period			645			495			645			502




	Stockholder’s contribution			—			150			—			150




	Capital stock expense			—			—			—			(7	)

		At end of period		645			645			645			645

Revaluation Capital




	At beginning of period			12			54			37			68




	Change in unrealized investment-gain (loss) (b)			7			3			(18	)		(11	)

		At end of period		19			57			19			57

Retained Earnings




	At beginning of period			491			446			485			434




	Net income			33			73			128			191




	Cash dividends declared- Common Stock			(30	)		(76	)		(109	)		(173	)




	Cash dividends declared- Preferred Stock			—			—			(1	)		(5	)




	Preferred securities distributions			(9	)		(5	)		(18	)		(9	)

		At end of period		485			438			485			438

Total Common Stockholder’s Equity			$	1,990		$	1,981		$	1,990		$	1,981





(a) Number of shares of common stock outstanding was 84,108,789 for all periods presented.




(b) Disclosure of Comprehensive Income:
Revaluation capital Unrealized investment-gain (loss), net of tax of $4, $2,
$(10) and $(6), respectively			$	7		$	3		$	(18	)	$	(11	)




Net income				33			73			128			191

		Total Comprehensive Income	$	40		$	76		$	110		$	180

The accompanying condensed notes are an integral part of these statements.

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Consumers Energy Company
Condensed Notes to Consolidated Financial Statements

These Condensed Notes and their related Consolidated Financial Statements should be read along with the Consolidated Financial Statements and Notes contained in the Consumers 1999 Form 10-K that includes the Report of Independent Public Accountants. In the opinion of management, the unaudited information herein reflects all adjustments necessary to assure the fair presentation of financial position, results of operations and cash flows for the periods presented.

1: Corporate Structure and Summary of Significant Accounting Policies

Corporate Structure: Consumers is a combination electric and gas utility company serving the Lower Peninsula of Michigan and is a subsidiary of CMS Energy, a holding company. Consumers’ customer base includes a mix of residential, commercial and diversified industrial customers, the largest segment of which is the automotive industry.

Utility Regulation: Consumers accounts for the effects of regulation based on the regulated utility accounting standard SFAS 71, Accounting for the Effects of Certain Types of Regulation. As a result, the actions of regulators affect when Consumers recognizes revenues, expenses, assets and liabilities.

In March 1999, Consumers received MPSC electric restructuring orders. Consistent with these orders, Consumers discontinued application of SFAS 71 for the energy supply portion of its business in the first quarter of 1999 because Consumers expected to implement retail open access for its electric customers in September 1999. Discontinuation of SFAS 71 for the energy supply portion of Consumers’ business resulted in Consumers reducing the carrying value of its Palisades plant-related assets by approximately $535 million and establishing a regulatory asset for a corresponding amount. According to current accounting standards, Consumers can continue to carry its energy supply-related regulatory assets if legislation or an MPSC rate order allows the collection of cash flows to recover these regulatory assets from its regulated transmission and distribution customers. At June 30, 2000, Consumers had a net investment in energy supply facilities of $1.017 billion included in electric plant and property. See Note 2, Uncertainties, “Electric Rate Matters – Electric Restructuring.”

Reportable Segments: Consumers has two reportable segments: electric and gas. The electric segment consists of activities associated with the generation, transmission and distribution of electricity. The gas segment consists of activities associated with the production, transportation, storage and distribution of natural gas. Consumers’ reportable segments are domestic strategic business units organized and managed by the nature of the product and service each provides. The accounting policies of the segments are the same as those described in Consumers’ 1999 Form 10-K. Consumers’ management evaluates performance based on pretax operating income. The Consolidated Statements of Income show operating revenue and pretax operating income by reportable segment. Intersegment sales and transfers are accounted for at current market prices and are eliminated in consolidated pretax operating income by segment.

Risk Management Activities and Derivatives Transactions: Consumers and its subsidiaries use derivative instruments, including swaps and options, to manage exposure to fluctuations in interest rates and commodity prices, respectively. To qualify for hedge accounting, derivatives must meet the following criteria: 1) the item to be hedged exposes the enterprise to price and interest rate risk; and 2) the derivative reduces that exposure and is designated as a hedge.

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Derivative instruments contain credit risk if the counterparties, including financial institutions and energy marketers, fail to perform under the agreements. Consumers minimizes such risk by performing financial credit reviews using, among other things, publicly available credit ratings of such counterparties. The risk of nonperformance by the counterparties is considered remote.

Consumers enters into interest rate swap agreements to exchange variable-rate interest payment obligations for fixed-rate obligations without exchanging the underlying notional amounts. These agreements convert variable-rate debt to fixed-rate debt in order to reduce the impact of interest rate fluctuations. The notional amounts parallel the underlying debt levels and are used to measure interest to be paid or received and do not represent the exposure to credit loss.

Consumers enters into electric option contracts to ensure a reliable source of capacity to meet its customers’ electric requirements and to limit its risk associated with electricity price increases. It is management’s intent to take physical delivery of the commodity. Consumers continuously evaluates its daily capacity needs and sells the option contracts, if marketable, when it has excess daily capacity. Consumers’ maximum exposure associated with these options is limited to the price paid. As of June 30, 2000, Consumers has a deferred asset of $38 million for electric call option contracts, and commitments to purchase additional call options in the amount of $20 million.

2: Uncertainties

Electric Contingencies

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electric generating facilities, to achieve the same emission rate as that required by the currently challenged September 1998 EPA final rule. Under the revised Section 126 rule, the emission rate will become effective on May 1, 2003 and apply during the ozone season in 2003 and during each subsequent year. Various parties’ petitions challenging the EPA’s rule have been filed.

Until all air quality targets are conclusively established, the estimated cost of compliance discussed below is subject to revision.

Consumers may need an equivalent amount of capital expenditures to comply with the new small particulate standards sometime after 2004 if those standards become effective.

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Electric Rate Matters

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employed a strategy of purchasing electric call option contracts for the physical delivery of electricity during the months of June through September. Consumers expects to use a similar strategy in the future. As of June 30, 2000, Consumers had purchased or had commitments to purchase electric call option contracts for summer 2000 at a cost of approximately $51 million, of which $6 million had expired. Additionally, as of June 30, 2000 Consumers had purchased or had commitments to purchase electric call option contracts partially covering the reserve margin requirements for summer 2001, 2002 and 2003 at a cost of $13 million with expected total future purchases to reach $56 million this year.

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2000 dismissing the ABATE complaint. On July 12, 2000 ABATE filed a rehearing petition with the MPSC. Consumers cannot predict the outcome of the rehearing process.

Other Electric Uncertainties

Summarized Statements of Income for CMS Midland and CMS Holdings (unaudited)


	In Millions

	Six Months Ended

June 30	2000		1999

Pretax operating income	$	20	$	26




Income taxes and other		6		8

Net income	$	14	$	18

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March 1999, Consumers also filed an application with the MPSC for accounting and ratemaking approvals related to the PECO agreement. If used as an offset to electric customers’ Transition Cost responsibility, Consumers estimates that there could be a reduction of as much as $58 million (on a net present value basis) of Transition Cost related to the MCV PPA. In an order issued in April 1999, the MPSC conditionally approved the requests for accounting and rate-making treatment to the extent that customer rates are not increased from the current level absent the agreement and as modified by the order. In response to Consumers’ and other parties’ requests for clarification and rehearing, in an August 1999 opinion, the MPSC partially granted the relief Consumers requested on rehearing and attached certain additional conditions to its approval. Those conditions relate to Consumers continued decision to carry out the electricity customer choice program (which Consumers has affirmed as discussed above) and a determination to file for approval of a revised capacity solicitation process (which Consumers filed). The August opinion is a companion order to a power supply cost reconciliation order issued on the same date in another case. This order affects the level of frozen power supply costs recoverable in rates during future years when the transaction with PECO would be taking place. Consumers filed a motion for clarification of the order relating to the PECO agreement, which is still pending. Due to uncertainties associated with electric industry restructuring legislation in Michigan, Consumers and PECO entered into an interim arrangement for the sale of 125 MW of PPA capacity and associated energy to PECO during 2000. Prices in the interim arrangement are identical to the March 1999 power sales agreement. Consumers is currently evaluating its options associated with the PECO agreement due to the recent electric restructuring legislation and related MPSC decisions.


	In Millions

	2000		2001		2002		2003		2004

Estimated cash underrecoveries at 98.5%, net of tax	$	36	$	39	$	38	$	37	$	36

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which precludes the MCV Partnership from recovering the avoided cost rate. The MPSC appealed the United States District Court order. Consumers cannot predict the outcome of this litigation.

The NRC requires Consumers to make certain calculations and report on the continuing ability of the Palisades reactor vessel to withstand postulated pressurized thermal shock events during its remaining license life, considering the embrittlement of reactor materials. In December 1996, Consumers received an interim Safety Evaluation Report from the NRC indicating that the reactor vessel can be safely operated through 2003 before reaching the NRC’s screening criteria for reactor embrittlement. On February 21, 2000, Consumers submitted an analysis to the NRC that shows that the NRC’s screening criteria will not be reached until 2014. Accordingly, Consumers believes that with fuel management designed to minimize embrittlement, it can operate Palisades to the end of its license life in the year 2007 without annealing the reactor vessel. Nevertheless, Consumers will continue to monitor the matter.

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fuel for disposal by January 31, 1998. For fuel used after April 6, 1983, Consumers charges disposal costs to nuclear fuel expense, recovers them through electric rates, and then remits them to the DOE quarterly. Consumers elected to defer payment for disposal of spent nuclear fuel burned before April 7, 1983. At June 30, 2000, Consumers had a recorded liability to the DOE of $126 million, including interest, which is payable upon the first delivery of spent nuclear fuel to the DOE. Consumers recovered through electric rates the amount of this liability, excluding a portion of interest. In January 1997, in response to the DOE’s declaration that it would not begin to accept spent nuclear fuel deliveries in 1998, Consumers and other utilities filed suit in federal court. The court issued a decision in late 1997 affirming the DOE“s duty to take delivery of spent fuel, but was not specific as to the relief available for failure of the DOE to comply. Further litigation brought by Consumers and others in 1998, intended to produce specific relief for the DOE’s failure to comply, has not been successful to date. In April 2000, the U.S. Senate and House of Representatives approved federal legislation that would advance the cause of moving nuclear waste to a permanent repository. The President of the United States vetoed this legislation.

Capital Expenditures: Consumers estimates electric capital expenditures, including new lease commitments and environmental costs under the Clean Air Act, of $438 million for 2000, $580 million for 2001, and $545 million for 2002. For further information, see the Capital Expenditures Outlook section in the MD&A.

Gas Contingencies

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Gas Rate Matters

During the first two years of the pilot program, Consumers realized a benefit of $45 million as delivered gas commodity prices were below the $2.84 per mcf level collected from customers. Recent significant increases in gas prices have exposed Consumers to gas commodity losses during the last year of the program that ends March 31, 2001. Estimated loss of earnings for this last year of the program could range from $45 million to $135 million, of which Consumers has already recognized $45 million in the second quarter 2000 as a regulatory obligation. Under the provisions of the pilot program, Consumers has the right to request termination of the program at any time and to return to a GCR mechanism, pursuant to which the customer gas commodity prices would increase significantly from the current frozen rate. As an alternative to exercising that right, Consumers is considering an approach that, if approved by the MPSC, would potentially avoid further losses any greater than $45 million already recognized and mitigate the customer rate increases that would otherwise result. It is expected that such an approach could be implemented this fall.

Other Gas Uncertainties

Capital Expenditures: Consumers estimates gas capital expenditures, including new lease commitments, of $117 million for 2000, $140 million for 2001, and $145 million for 2002. For further information, see the Capital Expenditures Outlook section in the MD&A.

Other Uncertainties

In addition to the matters disclosed in this note, Consumers and certain of its subsidiaries are parties to certain lawsuits and administrative proceedings before various courts and governmental agencies arising from the ordinary course of business. These lawsuits and proceedings may involve personal injury, property damage, contractual matters, environmental issues, federal and state taxes, rates, licensing and other matters.

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Consumers has accrued estimated losses for certain contingencies discussed in this Note. Resolution of these contingencies is not expected to have a material adverse impact on Consumers’ financial position, liquidity, or results of operations.

3: Short-Term Financing and Capitalization

Authorization: At July 1, 2000, Consumers had FERC authorization to issue or guarantee through June 2002, up to $900 million of short-term securities outstanding at any one time. Consumers also had remaining FERC authorization to issue through June 2002 up to $250 million and $800 million of long-term securities with maturities up to 30 years for refinancing purposes and for general corporate purposes, respectively.

Short-Term Financing: Consumers has an unsecured $300 million credit facility and unsecured lines of credit aggregating $145 million. These facilities are available to finance seasonal working capital requirements and to pay for capital expenditures between long-term financings. At June 30, 2000, a total of $275 million was outstanding at a weighted average interest rate of 7.8 percent, compared with $264 million outstanding at June 30, 1999, at a weighted average interest rate of 6.1 percent.

Other: Under the provisions of its Articles of Incorporation, Consumers had $360 million of unrestricted retained earnings available to pay common dividends at June 30, 2000. In January 2000, Consumers declared and paid a $79 million common dividend, in April 2000, Consumers declared a $30 million common dividend which was paid in May 2000. In July 2000, Consumers declared a $17 million common dividend payable in August 2000.

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Report of Independent Public Accountants

To Consumers Energy Company:

We have reviewed the accompanying consolidated balance sheets of CONSUMERS ENERGY COMPANY (a Michigan corporation and wholly owned subsidiary of CMS Energy Corporation) and subsidiaries as of June 30, 2000 and 1999, the related consolidated statements of income and common stockholder’s equity for the three-month and six-month periods then ended and the related consolidated statements of cash flows for the six-month periods then ended. These financial statements are the responsibility of the Company’s management.

We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Consumers Energy Company and subsidiaries as of December 31, 1999, and, in our report dated February 4, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Arthur Andersen LLP

Detroit, Michigan,
July 28, 2000.

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Panhandle Eastern Pipe Line Company

Management’s Discussion and Analysis

Panhandle is primarily engaged in the interstate transportation and storage of natural gas. Panhandle owns a LNG regasification plant, related tanker port unloading facilities and LNG and gas storage facilities. The rates and conditions of service of interstate natural gas transmission, storage and LNG operations of Panhandle are subject to the rules and regulations of the FERC.

The MD&A of this Form 10-Q should be read along with the MD&A and other parts of Panhandle’s 1999 Form
10-K. This MD&A also refers to, and in some sections specifically incorporates by reference, Panhandle’s Condensed Notes to Consolidated Financial Statements and should be read in conjunction with such Statements and Notes. This report and other written and oral statements made by Panhandle from time to time contain forward-looking statements, as defined by the Private Securities Litigation Reform Act of 1995. The words “anticipates,” “believes,” “estimates,” “expects,” “intends,” and “plans” and variations of such words and similar expressions, are intended to identify forward-looking statements that involve risk and uncertainty. These forward-looking statements are subject to various factors which could cause Panhandle’s actual results to differ materially from those anticipated in such statements. Panhandle disclaims any obligation to update or revise forward-looking statements, whether from new information, future events or otherwise. Panhandle details certain risk factors, uncertainties and assumptions in this MD&A and particularly in the section entitled “CMS Energy, Consumers, and Panhandle Forward-Looking Statements Cautionary Factors” in CMS Energy’s 1999 Form 10-K, Item 1 and periodically in various public filings it makes with the SEC. This discussion of potential risks and uncertainties is by no means complete but is designed to highlight important factors that may impact Panhandle’s outlook. This report also describes material contingencies in the Condensed Notes to Consolidated Financial Statements and the readers are encouraged to read such Notes.

In March 2000, Trunkline, a subsidiary of Panhandle, acquired the Sea Robin pipeline from El Paso Energy Corporation for cash of $74 million. Sea Robin is a 1 bcf per day capacity pipeline system located in the Gulf of Mexico. On March 27, 2000, Panhandle issued $100 million of 8.25 percent senior notes due 2010. Panhandle used the funds primarily to finance the purchase of Sea Robin (See Note 1).

In March 2000, Trunkline refiled its abandonment application with the FERC regarding its 26-inch pipeline with a planned conversion of the line from natural gas service to a refined products pipeline. Panhandle will own one-third interest in the project, called the Centennial Pipeline, which if approved is planned to go into service at the end of 2001 (See Note 2).

The acquisition of Panhandle by CMS Panhandle Holding in March 1999 was accounted for using the purchase method of accounting in accordance with generally accepted accounting principles. Panhandle allocated the purchase price paid by CMS Panhandle Holding to Panhandle’s net assets as of the acquisition date based on an appraisal completed in December 1999. Accordingly, the post-acquisition financial statements reflect a new basis of accounting. Pre-acquisition period and post-acquisition period financial results (separated by a heavy black line) are presented but are not comparable (See Note 1).

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The following information is provided to facilitate increased understanding of the consolidated financial statements and accompanying notes of Panhandle and should be read in conjunction with these financial statements. Because all of the outstanding common stock of Panhandle is owned by a wholly-owned subsidiary of CMS Energy, the following discussion uses the reduced disclosure format permitted by Form 10-Q for issuers that are wholly-owned subsidiaries of reporting companies.

Results of Operations

Net Income:


					In Millions

June 30	2000		1999		Change

Six Months Ended	$	41	$	48	$	(7	)

For the three months ended June 30, 2000, net income was $9 million, down $5 million from the same period in 1999, due primarily to decreased reservation revenues and higher corporate charges in 2000, partially offset by higher liquefied natural gas (LNG) terminalling revenues in 2000. For the six months ended June 30, 2000, net income was $41 million, down $7 million from the corresponding period in 1999 due primarily to decreased reservation revenues and higher corporate charges in 2000, partially offset by higher LNG terminalling revenues in 2000. Total natural gas transportation volumes delivered for the six months ended June 30, 2000 increased 16 percent from 1999 primarily due to the addition of Sea Robin.

Revenues for the three months and the six months ended June 30, 2000 increased $2 million and $6 million respectively, from the corresponding periods in 1999 due primarily to increased LNG terminalling revenues and revenues from Sea Robin in 2000, partially offset by lower reservation revenues in 2000.

Operating expenses for the three months and the six months ended June 30, 2000 increased $10 million and $13 million respectively, from the corresponding period in 1999 due primarily to the increased corporate charges and the acquisition of Sea Robin.

Other income for the three months ended June 30, 2000 increased $1 million, from the corresponding period in 1999, due to interest income on a related party Note Receivable. For the six months ended June 30, 2000 other income decreased $2 million from the corresponding period in 1999 primarily due to non-recurring transition surcharge recoveries recorded in 1999.

Interest on long-term debt for the three months and the six months ended June 30, 2000 increased $2 million and $16 million respectively, from the corresponding period in 1999 primarily due to interest on the additional debt incurred by Panhandle in 2000 and 1999 (See Note 1 and 6). Other interest expense was flat for the three months ended June 30, 2000. Other interest expense decreased $13 million for the six months ended June 30, 2000 from the corresponding period in 1999, primarily due to interest on an intercompany note with PanEnergy. The note was eliminated with the sale of Panhandle to CMS Panhandle Holding (See Note 1 and Note 3).

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Pretax Operating Income:


	In Millions

	Six Months
	Ended June 30
Change Compared to Prior Year	2000 vs 1999

Reservation revenue	$	(12	)




LNG terminalling revenue		9




Commodity revenue		7




Other revenue		2




Operations and maintenance		(13	)




Depreciation and amortization		(2	)




General taxes		2

Total Change	$	(7	)

Outlook

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Other Matters

Environmental Matters

PCB (Polychlorinated Biphenyl) Assessment and Clean-up Programs: Panhandle identified environmental contamination at certain sites on its systems and undertook clean-up programs at these sites. The contamination was caused by the past use of lubricants containing PCB’s in compressed air systems and resulted in contamination of the on-site air systems, wastewater collection facilities and on-site disposal areas. Soil and sediment testing to date detected no significant off-site contamination. Panhandle communicated with the EPA and appropriate state regulatory agencies on these matters. Under the terms of the sale of Panhandle to CMS Energy (See Note 1), a subsidiary of Duke Energy is obligated to complete the Panhandle clean-up programs at certain agreed-upon sites and to defend and indemnify Panhandle against certain future environmental litigation and claims. Panhandle expects these clean-up programs to continue through 2001.

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Panhandle Eastern Pipe Line Company
Consolidated Statement of Income
(In millions)
(Unaudited)


		Three Months Ended
		June 30				Six Months Ended		March 29 -		January 1 -
						June 30,		June 30,		March 28,
		2000		1999		2000		1999		1999

Operating Revenue Transportation and storage of natural gas		$	92	$	97	$	217	$	101	$	123




Other			13		6		24		6		5

	Total operating revenue		105		103		241		107		128

Operating Expenses Operation and maintenance			49		38		93		40		40




Depreciation and amortization			16		16		32		16		14




General taxes			6		7		12		7		7

	Total operating expenses		71		61		137		63		61

Pretax Operating Income			34		42		104		44		67




Other Income, Net			2		1		3		1		4




Interest Charges Interest on long-term debt			22		20		41		20		5




Other interest			—		—		—		—		13

	Total interest charges		22		20		41		20		18

Net Income Before Income Taxes			14		23		66		25		53




Income Taxes			5		9		25		10		20

Consolidated Net Income		$	9	$	14	$	41	$	15	$	33

The accompanying condensed notes are an integral part of these statements.

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Panhandle Eastern Pipe Line Company
Consolidated Statements of Cash Flows
(In millions)
(Unaudited)


			Six Months Ended			March 29 -			January 1 -
			June 30,			June 30,			March 28,
			2000			1999			1999

CASH FLOWS FROM OPERATING ACTIVITIES Net income			$	41		$	15		$	33




	Adjustments to reconcile net income to net cash provided by operating activities:




	Depreciation and amortization			32			16			14




	Deferred income taxes			26			8			—




	Changes in current assets and liabilities			(23	)		25			(29	)




	Other, net			4			(4	)		3

		Net cash provided by operating activities		80			60			21

CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of Panhandle				—			(1,900	)		—




	Capital and investment expenditures			(89	)		(8	)		(4	)




	Net increase in advances receivable — PanEnergy			—			—			(17	)

		Net cash used in investing activities		(89	)		(1,908	)		(21	)

CASH FLOWS FROM FINANCING ACTIVITIES




	Contribution from parent			—			1,116			—




	Proceeds from senior notes			99			785			—




	Net increase in note receivable — CMS			(36	)		(40	)		—




	Dividends paid			(39	)		(13	)		—

		Net cash provided by financing activities		24			1,848			—

	Net Increase (Decrease) in Cash and Temporary Cash Investments			15			—			—




	Cash and Temporary Cash Investments, Beginning of Period			—			—			—

	Cash and Temporary Cash Investments, End of Period		$	15		$	—		$	—

Other cash flow activities were:




	Interest paid (net of amounts capitalized)		$	38		$	—		$	12




	Income taxes paid (net of refunds)			5			2			37

The accompanying condensed notes are an integral part of these statements.

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Panhandle Eastern Pipe Line Company
Consolidated Balance Sheets

(In millions)
(Unaudited)


			June 30,		December 31,
			2000		1999

ASSETS




Property, Plant and Equipment Cost			$	1,622	$	1,492




Less accumulated depreciation and amortization				76		37

		Sub-total		1,546		1,455




	Construction work-in-progress			31		45

		Net property, plant and equipment		1,577		1,500

Investments Investment in affiliates				2		2

		Total investments and other assets		2		2

Current Assets Cash and temporary cash investments				15		—




	Receivables, less allowances of $1 as of June 30, 2000 and Dec. 31, 1999			106		112




	Inventory and supplies			70		34




	Deferred income taxes			12		11




	Note receivable — CMS Capital			121		85




	Other			57		30

		Total current assets		381		272

Non-current Assets Goodwill, net				764		774




	Debt issuance cost			11		11




	Other			5		1

		Total non-current assets		780		786

	Total Assets		$	2,740	$	2,560

The accompanying condensed notes are an integral part of these statements.

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Panhandle Eastern Pipe Line Company
Consolidated Balance Sheets

(In millions)
(Unaudited)


				June 30,		December 31,
				2000		1999

COMMON STOCKHOLDER’S EQUITY AND LIABILITIES




Capitalization




	Common stockholder’s equity




		Common stock, no par, 1,000 shares authorized, issued and outstanding		$	1	$	1




		Paid-in capital			1,127		1,127




		Retained earnings			2		—

			Total common stockholder’s equity		1,130		1,128




	Long-term debt				1,193		1,094

			Total capitalization		2,323		2,222

Current Liabilities




	Accounts payable				10		28




	Accrued taxes				9		8




	Accrued interest				31		29




	Other				204		139

			Total current liabilities		254		204

Non-current Liabilities




	Deferred income taxes				72		45




	Other				91		89

			Total non-current liabilities		163		134

	Total Common Stockholder’s Equity and Liabilities			$	2,740	$	2,560

The accompanying condensed notes are an integral part of these statements.

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Panhandle Eastern Pipe Line Company
Consolidated Statements of Common Stockholder’s Equity

(In millions)
(Unaudited)


			Six Months Ended			March 29 -			January 1 -
			June 30,			June 30,			March 28,
			2000			1999			1999

Common Stock At beginning and end of period			$	1		$	1		$	1

Other Paid-in Capital




	At beginning of period			1,127			466			466




	Acquisition adjustment to eliminate original paid-in capital			—			(466	)		—




	Capital contribution of acquisition costs by parent			—			11			—




	Cash capital contribution by parent			—			1,116			—

		At end of period		1,127			1,127			466

Retained Earnings At beginning of period				—			101			92




	Acquisition adjustment to eliminate original retained earnings			—			(101	)		—




	Net Income			41			15			33




	Assumption of net liability by PanEnergy			—			—			57




	Common stock dividends			(39	)		(13	)		(81	)

		At end of period		2			2			101

	Total Common Stockholder’s Equity		$	1,130		$	1,130		$	568

The accompanying condensed notes are an integral part of these statements.

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Panhandle Eastern Pipe Line Company

Condensed Notes to Consolidated Financial Statements

These Condensed Notes and their related Consolidated Financial Statements should be read along with the Consolidated Financial Statements and Notes contained in the 1999 Form 10-K of Panhandle, which include the Reports of Independent Public Accountants. Certain prior year amounts have been reclassified to conform with the presentation in the current year. In the opinion of management, the unaudited information herein reflects all adjustments necessary to assure the fair presentation of financial position, results of operations and cash flows for the periods presented.

1. CORPORATE STRUCTURE

Panhandle is a wholly owned subsidiary of CMS Gas Transmission. Panhandle Eastern Pipe Line Company was incorporated in Delaware in 1929. Panhandle is engaged primarily in interstate transportation and storage of natural gas, and is subject to the rules and regulations of the FERC.

On March 29, 1999, Panhandle Eastern Pipe Line Company and its principal consolidated subsidiaries, Trunkline and Pan Gas Storage, as well as its affiliates, Trunkline LNG and Panhandle Storage, were acquired from subsidiaries of Duke Energy by CMS Panhandle Holding for $1.9 billion in cash and assumption of existing Panhandle debt of $300 million. Immediately following the acquisition, CMS Panhandle Holding contributed the stock of Trunkline LNG and Panhandle Storage to Panhandle Eastern Pipe Line Company. As a result, Trunkline LNG and Panhandle Storage became wholly owned subsidiaries of Panhandle Eastern Pipe Line Company.

In conjunction with the acquisition, Panhandle’s interests in Northern Border Pipeline Company, Panhandle Field Services Company, Panhandle Gathering Company, and certain other assets, including the Houston corporate headquarters building, were transferred to other subsidiaries of Duke Energy; all intercompany accounts and notes between Panhandle and Duke Energy subsidiaries were eliminated; and with respect to certain other liabilities, including tax, environmental and legal matters, CMS Energy and its affiliates, are indemnified for any resulting losses. In addition, Duke Energy agreed to continue its environmental clean-up program at certain properties and to defend and indemnify Panhandle against certain future environmental litigation and claims with respect to certain agreed-upon sites or matters.

CMS Panhandle Holding privately placed $800 million of senior unsecured notes and received a $1.1 billion initial capital contribution from CMS Energy to fund the acquisition of Panhandle. On June 15, 1999, CMS Panhandle Holding was merged into Panhandle, at which point the CMS Panhandle Holding notes became direct obligations of Panhandle. In September 1999, Panhandle completed an exchange offer which replaced the $800 million of notes originally issued by CMS Panhandle Holding with substantially identical SEC-registered notes.

The acquisition by CMS Panhandle Holding was accounted for using the purchase method of accounting in accordance with generally accepted accounting principles. Panhandle allocated the purchase price paid by CMS Panhandle Holding to Panhandle’s net assets as of the acquisition date based on an appraisal completed December 1999. Accordingly, the post-acquisition financial statements reflect a new basis of accounting. Pre-acquisition period and post-acquisition period financial results (separated by a heavy black line) are presented but are not comparable.

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Assets acquired and liabilities assumed are recorded at their fair values. Panhandle allocated the excess purchase price over the fair value of net assets acquired of approximately $800 million to goodwill and is amortizing this amount on a straight-line basis over forty years. The amortization of the excess purchase price over 40 years reflects the nature of the industry in which Panhandle competes as well as the long-lived nature of Panhandle’s assets. As a result of regulation, high replacement costs, and competition, entry into the natural gas transmission and storage business requires a significant investment. The excess purchase price over the prior carrying amount of Panhandle’s net assets as of March 29, 1999 totaled $1.3 billion, and was allocated as follows:


	In Millions

Property, plant and equipment	$	633




Accounts receivable		3




Inventory		(9	)




Goodwill		788




Regulatory assets, net		(15	)




Liabilities		(72	)




Long-term debt		(6	)




Other		(16	)

Total	$	1,306

In March 2000, Trunkline, a subsidiary of Panhandle, acquired the Sea Robin pipeline from El Paso Energy Corporation for cash of approximately $74 million (See Note 6). Sea Robin is a 1 bcf per day capacity pipeline system located in the Gulf of Mexico.

2. REGULATORY MATTERS

Effective August 1996, Trunkline placed into effect a general rate increase, subject to refund. On September 16, 1999, Trunkline filed a FERC settlement agreement to resolve certain issues in this proceeding. FERC approved this settlement February 1, 2000 and required refunds of approximately $2 million which were made in April 2000, with supplemental refunds of $1.3 million in June 2000. On January 12, 2000, FERC issued an order on the remainder of the rate proceeding which, if approved without modification, would result in a substantial reduction to Trunkline’s tariff rates which would impact future revenues and require refunds. Trunkline has requested rehearing of certain matters in this order.

On March 9, 2000, Trunkline filed an abandonment application with FERC seeking to abandon 720 miles of its 26-inch diameter pipeline that extends from Longville, Louisiana to Bourbon, Illinois. This filing is in

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conjunction with a plan for a limited liability corporation to convert the line from natural gas transmission service to a refined products pipeline, called Centennial Pipeline, by the end of 2001. Panhandle will own a one third interest in the venture along with TEPPCO Partners L.P. and Marathon Ashland Petroleum LLC.

On May 19, 1999, Trunkline and Trunkline LNG submitted a compliance filing advising the FERC that the acquisition by CMS Energy of Trunkline LNG triggered certain provisions of a 1992 settlement. The settlement resolved issues related to minimum bill provisions of the Trunkline LNG Rate Schedule PLNG-1, as well as pending rate matters for Trunkline and refund matters for Trunkline LNG. Specifically, the settlement provisions required Trunkline LNG, and Trunkline in turn, to make refunds to customers, including Panhandle Eastern Pipe Line Company and Consumers, who were parties to the settlement, if the ownership of all or a portion of the LNG terminal was transferred to an unaffiliated entity. The Commission approved the LNG settlement to be effective April 1,1999. Trunkline’s refunds, which were made in April 2000, included $12 million to Consumers Energy, $4 million to Panhandle Eastern Pipe Line Company, and $1 million to other Trunkline customers. In conjunction with the acquisition of Panhandle by CMS Energy, Duke Energy indemnified Panhandle for this refund obligation and reimbursed Trunkline for the refunds in April 2000. On May 31, 2000, the FERC approved Panhandle Eastern Pipe Line Company’s flow through of its portion of the settlement amounts to its customers.

3. RELATED PARTY TRANSACTIONS

Interest charges include $13 million for the six months ended June 30, 1999 for interest associated with notes payable to a subsidiary of Duke Energy. Other income includes $3 million for the six months ended June 30, 2000 for interest on Note Receivable from CMS Capital.

A summary of certain balances due to or due from related parties included in the Consolidated Balance Sheets is as follows:


			In Millions
	June 30,		December 31,

	2000		1999

Receivables	$	29	$	8




Accounts payable		5		16

4. GAS IMBALANCES

The Consolidated Balance Sheets include in-kind balances as a result of differences in gas volumes received and delivered. At June 30, 2000 and December 31, 1999, other current assets included $40 million and $22 million, respectively, and other current liabilities included $86 million and $30 million, respectively, related to gas imbalances. Panhandle values gas imbalances at the lower of cost or market.

5. INCOME TAXES

As described in Note 1, CMS Panhandle Holding acquired the stock of Panhandle from subsidiaries of Duke Energy for a total of $2.2 billion in cash and acquired debt. Panhandle treated the acquisition as

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an asset acquisition for tax purposes, which eliminated Panhandle’s deferred tax liability and gave rise to a new tax basis in Panhandle’s assets equal to the purchase price.

6. LONG TERM DEBT

On March 27, 2000, Panhandle issued $100 million of 8.25 percent senior notes due 2010. Panhandle used the funds primarily to finance the purchase of Sea Robin (See Note 1). In July, these notes were exchanged for substantially identical SEC registered notes.

On March 29, 1999, CMS Panhandle Holding privately placed $800 million of senior notes (See Note 1) including: $300 million of 6.125 percent senior notes due 2004; $200 million of 6.5 percent senior notes due 2009; and $300 million of 7.0 percent senior notes due 2029. On June 15, 1999, CMS Panhandle Holding merged into Panhandle and Panhandle assumed the obligations of CMS Panhandle Holding under the notes and the indenture. In September 1999, Panhandle completed an exchange offer which replaced the $800 million of notes originally issued by CMS Panhandle Holding with substantially identical SEC-registered notes.

In conjunction with the application of purchase accounting, Panhandle revalued its existing notes totaling $300 million. This resulted in a net premium recorded of approximately $5 million.

7. INVESTMENT IN AFFILIATES

Lee 8 Storage: Panhandle, through its subsidiary Panhandle Storage, owns a 40 percent interest in the Lee 8 partnership, which operates a 1.4 bcf natural gas storage facility in Michigan. This interest results from the contribution of the stock of Panhandle Storage to Panhandle Eastern Pipe Line Company by CMS Panhandle Holding on March 29, 1999.

8. SFAS 71

As a result of Panhandle’s new cost basis resulting from the merger with CMS Panhandle Holding, which includes costs not likely to be considered for regulatory recovery, in addition to the level of discounting being experienced by Panhandle, it no longer meets the criteria of SFAS 71 and has discontinued application of SFAS 71. Accordingly, upon acquisition by CMS Panhandle Holding, the remaining net regulatory assets of approximately $15 million were eliminated in purchase accounting (See Note 1).

9. COMMITMENTS AND CONTINGENCIES

CAPITAL EXPENDITURES: Panhandle estimates capital expenditures and investments, including allowance for funds used during construction, to be $60 million in 2001 and 2002. Panhandle prepared these estimates for planning purposes and they are subject to revision. Panhandle satisfies capital expenditures using cash from operations.

LITIGATION: Under the terms of the sale of Panhandle to CMS Energy discussed in Note 1 to the Consolidated Financial Statements, subsidiaries of Duke Energy indemnified CMS Energy and its

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affiliates from losses resulting from certain legal and tax liabilities of Panhandle, including the matter specifically discussed below.

In May 1997, Anadarko filed suits against Panhandle and other PanEnergy affiliates, as defendants, both in the United States District Court for the Southern District of Texas and State District Court of Harris County, Texas. Pursuing only the federal court claim, Anadarko claims that it was effectively indemnified by the defendants against any responsibility for refunds of Kansas ad valorem taxes which are due from purchasers of gas from Anadarko, retroactive to 1983. In October 1998 and January 1999, the FERC issued orders on ad valorem tax issues, finding that first sellers of gas were primarily liable for refunds. The FERC also noted that claims for indemnity or reimbursement among the parties would be better addressed by the United States District Court for the Southern District of Texas. Panhandle believes the resolution of this matter will not have a material adverse effect on consolidated results of operations or financial position.

Panhandle is also involved in other legal, tax and regulatory proceedings before various courts, regulatory commissions and governmental agencies regarding matters arising in the ordinary course of business, some of which involve substantial amounts. Where appropriate, Panhandle has made accruals in accordance with SFAS 5, Accounting for Contingencies, in order to provide for such matters. Management believes the final disposition of these proceedings will not have a material adverse effect on consolidated results of operations or financial position.

ENVIRONMENTAL MATTERS: Panhandle is subject to federal, state and local regulations regarding air and water quality, hazardous and solid waste disposal and other environmental matters. Panhandle has identified environmental contamination at certain sites on its systems and has undertaken clean-up programs at these sites. The contamination resulted from the past use of lubricants in compressed air systems containing PCBs and the prior use of wastewater collection facilities and other on-site disposal areas. Under the terms of the sale of Panhandle to CMS Energy, a subsidiary of Duke Energy is obligated to complete the Panhandle clean-up programs at certain agreed-upon sites and to indemnify against certain future environmental litigation and claims. The Illinois EPA included Panhandle and Trunkline, together with other non-affiliated parties, in a cleanup of former waste oil disposal sites in Illinois. Prior to a partial cleanup by the United States EPA, a preliminary study estimated the cleanup costs at one of the sites to be between $5 million and $15 million. The State of Illinois contends that Panhandle Eastern Pipe Line Company’s and Trunkline’s share for the costs of assessment and remediation of the sites, based on the volume of waste sent to the facilities, is 17.32 percent. Management believes that the costs of cleanup, if any, will not have a material adverse impact on Panhandle’s financial position, liquidity, or results of operations.

OTHER COMMITMENTS AND CONTINGENCIES: In 1993, the U.S. Department of the Interior announced its intention to seek additional royalties from gas producers as a result of payments received by such producers in connection with past take-or-pay settlements, and buyouts and buydowns of gas sales contracts with natural gas pipelines. Panhandle’s pipelines, with respect to certain producer contract settlements, may be contractually required to reimburse or, in some instances, to indemnify producers against such royalty claims. The potential liability of the producers to the government and of the pipelines to the producers involves complex issues of law and fact which are likely to take substantial time to resolve. If required to reimburse or indemnify the producers, Panhandle’s pipelines will file with FERC to recover a portion of these costs from pipeline customers. Management believes

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these commitments and contingencies will not have a material adverse effect on consolidated results of operations or financial position.

Under the terms of a settlement related to a transportation agreement between Panhandle and Northern Border Pipeline Company, Panhandle guarantees payment to Northern Border Pipeline Company under a transportation agreement held by a third party. The transportation agreement requires estimated total payments of $24 million for the remainder of 2000 through the third quarter of 2001. Management believes the probability that Panhandle will be required to perform under this guarantee is remote.

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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To Panhandle Eastern Pipe Line Company:

We have reviewed the accompanying consolidated balance sheet of Panhandle Eastern Pipe Line Company (a Delaware corporation) and subsidiaries as of June 30, 2000, and the related consolidated statements of income, common stockholder’s equity and cash flows for the three-month and six-month periods ended June 30, 2000 and 1999. These financial statements are the responsibility of the company’s management.

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

We have previously audited, in accordance with auditing standards generally accepted in the United States, the consolidated balance sheet of Panhandle Eastern Pipe Line Company and subsidiaries as of December 31, 1999, and, in our report dated February 25, 2000, we expressed an unqualified opinion on that statement. In our opinion, the information set forth in the accompanying consolidated balance sheet as of December 31, 1999, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

/s/ Arthur Andersen LLP

Houston, Texas
July 31, 2000

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Quantitative and Qualitative
Disclosures about Market Risk

CMS Energy

Quantitative and Qualitative Disclosures about Market Risk is contained in PART I: CMS Energy Corporation’s Management’s Discussion and Analysis, which is incorporated by reference herein.

Consumers

Quantitative and Qualitative Disclosures about Market Risk is contained in PART I: Consumers’ Energy Company’s Management’s Discussion and Analysis, which is incorporated by reference herein.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The discussion below is limited to an update of developments that have occurred in various judicial and administrative proceedings, many of which are more fully described in CMS Energy’s, Consumers’ and Panhandle’s Form 10-K for the year ended December 31, 1999, and in their Form 10-Q for the quarter ended March 31, 2000. Reference is made to the CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS, in particular Note 2 — Uncertainties for CMS Energy and Consumers, and Note 9 — Commitments and Contingencies for Panhandle, included herein for additional information regarding various pending administrative and judicial proceedings involving rate, operating, regulatory and environmental matters.

CMS ENERGY

Oxford Tire Recycling: CMS Generation and the Attorney General of California are negotiating an interim settlement to partially comply with the administrative order in an effort to stop the running of the penalties. The settlement is estimated at $800,000 of clean up.

CO-1

CMS ENERGY, CONSUMERS and PANHANDLE

Environmental Matters: CMS Energy, Consumers, Panhandle and their subsidiaries and affiliates are subject to various federal, state and local laws and regulations relating to the environment. Several of these companies have been named parties to various actions involving environmental issues. Based on their present knowledge and subject to future legal and factual developments, CMS Energy, Consumers and Panhandle believe that it is unlikely that these actions, individually or in total, will have a material adverse effect on their financial condition. See CMS Energy’s, Consumers’ and Panhandle’s MANAGEMENT’S DISCUSSION AND ANALYSIS; and CMS Energy’s, Consumers’ and Panhandle’s CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.

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

At the CMS Energy Annual Meeting of Shareholders held on May 26, 2000, the shareholders ratified the appointment of Arthur Andersen LLP as independent auditors of CMS Energy for the year ended December 31, 2000. The vote was 94,835,175 shares in favor and 720,742 against, with 553,624 abstaining. The CMS Energy shareholders voted on a proposal to permit awards under CMS Energy Corporation’s Executive Incentive Compensation Plan to be income tax deductible by CMS Energy. The vote was 88,209,892 shares in favor and 4,844,496 against, with 3,055,169 abstaining. The CMS Energy shareholders also elected all eleven nominees for the office of director. The votes for individual nominees were as follows:

CMS ENERGY CORPORATION


Number of Votes:	For		Against		Total

William T. McCormick, Jr.		84,193,755		11,915,806		96,109,561




John M. Deutch		90,144,887		5,964,674		96,109,561




James J. Duderstadt		93,140,821		2,968,740		96,109,561




Kathleen R. Flaherty		93,218,928		2,890,633		96,109,561




Victor J. Fryling		84,161,537		11,948,024		96,109,561




Earl D. Holton		93,203,245		2,906,316		96,109,561




William U. Parfet		93,214,415		2,895,146		96,109,561




Percy A. Pierre		93,207,514		2,902,407		96,109,561




Kenneth L. Way		90,418,236		5,691,325		96,109,561




Kenneth Whipple		93,196,005		2,913,556		96,109,561




John B. Yasinsky		93,233,393		2,876,168		96,109,561

Consumers did not solicit proxies for the matters submitted to votes at the contemporaneous May 26, 2000 Consumers’ Annual Meeting of Shareholders. All 84,108,789 shares of Consumers Common Stock were voted in favor of re-electing the above-named individuals as directors of Consumers, in favor of ratifying the appointment of Arthur Andersen LLP as independent auditors of Consumers for the year ended December 31, 2000, and in favor of a proposal to amend and restate the Restated Articles of Incorporation to (a) delete the current Article VIII to remove the requirement that members of the Board must own stock of Consumers to remain a member of the Board, (b) add a new Article VIII to provide authority for written consents of the shareholders for annual and special meetings, and (c) eliminate obsolete material. None of the 441,599 shares of Consumers Preferred Stock were voted at the Annual Meeting.

CO-2

ITEM 5. OTHER INFORMATION

A shareholder who intends to submit a proposal for a vote at CMS Energy’s 2001 Annual Meeting of Shareholders but which will not be included in CMS Energy’s 2001 proxy statement must send the proposal to reach CMS Energy on or before March 1, 2001. The proposals should be addressed to: Mr. Thomas A. McNish, Corporate Secretary, Fairlane Plaza South, Suite 1100, 330 Town Center Drive, Dearborn, Michigan 48126. Failure to timely submit the proposal will allow management to use discretionary voting authority when the proposal is raised at the Annual Meeting.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K


(a)	List of Exhibits




(4)		Credit Agreement, dated as of June 27, 2000 among CMS Energy, as Borrower, and the Banks named therein, as Banks, and The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A. and Barclays Bank plc as Co-Syndication Agents, and Citibank, N.A. as Documentation Agent.




(12)	- -	CMS Energy:	Statements regarding computation of Ratio of Earnings to Fixed Charges




(15)(a)	- -	CMS Energy:	Letter of Independent Public Accountant




(15)(b)	- -	Consumers:	Letter of Independent Public Accountant




(27)(a)	- -	CMS Energy:	Financial Data Schedule




(27)(b)	- -	Consumers:	Financial Data Schedule




(27)(c)	- -	Panhandle:	Financial Data Schedule




(b)	Reports on Form 8-K

CMS ENERGY

Current Reports filed May 1, 2000, June 5, 2000 and July 6, 2000 covering matters pursuant to ITEM 5. OTHER EVENTS.

CONSUMERS

Current Reports filed June 6, 2000 and July 6, 2000 covering matters pursuant to ITEM 5. OTHER EVENTS.

PANHANDLE

No Current Reports on Form 8-K filed during the second quarter.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, each registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. The signature for each undersigned company shall be deemed to relate only to matters having reference to such company or its subsidiary.


		CMS ENERGY CORPORATION (Registrant)

Dated: August 11, 2000		By: /s/ A.M. Wright Alan M. Wright Senior Vice President and Chief Financial Officer

		CONSUMERS ENERGY COMPANY (Registrant)

Dated: August 11, 2000		By: /s/ A.M. Wright Alan M. Wright Senior Vice President and Chief Financial Officer

		PANHANDLE EASTERN PIPE LINE COMPANY (Registrant)

Dated: August 11, 2000		By: /s/ A.M. Wright Alan M. Wright Senior Vice President, Chief Financial Officer and Treasurer

CO-4


Exhibit
Number		Description

(4)		Credit Agreement, dated as of June 27, 2000 among CMS Energy, as Borrower, and the Banks named therein, as Banks, and The Chase Manhattan Bank, as Administrative Agent and Collateral Agent, and Bank of America, N.A. and Barclays Bank plc as Co-Syndication Agents, and Citibank, N.A. as Documentation Agent.




(12)	- -	CMS Energy: Statements regarding computation of Ratio of Earnings to Fixed Charges




(15)(a)	- -	CMS Energy: Letter of Independent Public Accountant




(15)(b)	- -	Consumers: Letter of Independent Public Accountant




(27)(a)	- -	CMS Energy: Financial Data Schedule




(27)(b)	- -	Consumers: Financial Data Schedule




(27)(c)	- -	Panhandle: Financial Data Schedule

   1
                                                                  EXHIBIT 4


- -------------------------------------------------------------------------------

                                 $1,000,000,000

                                CREDIT AGREEMENT

                           Dated as of June 27, 2000,

                                      Among

                             CMS ENERGY CORPORATION
                                   as Borrower

                                       and

                             THE BANKS NAMED HEREIN
                                    as Banks

                                       and

                            THE CHASE MANHATTAN BANK
                  as Administrative Agent and Collateral Agent

                                       and

                              BANK OF AMERICA, N.A.
                                       and
                                BARCLAYS BANK PLC
                            as Co-Syndication Agents

                                       and

                                 CITIBANK, N.A.
                             as Documentation Agent

                           ----------------------------

                              CHASE SECURITIES INC.
                      as Advisor, Arranger and Book Manager


- --------------------------------------------------------------------------------


   2

                                TABLE OF CONTENTS



Section                                                                                      Page
                                                                                       
                                    ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01.  Certain Defined Terms............................................................1
SECTION 1.02.  Computation of Time Periods; Construction.......................................18
SECTION 1.03.  Accounting Terms................................................................19

                                   ARTICLE II
                                   COMMITMENTS
SECTION 2.01.  The Commitments.................................................................19
SECTION 2.02.  Fees............................................................................19
SECTION 2.03.  Reduction of the Commitments....................................................19
SECTION 2.04.  Computations of Outstandings....................................................20

                                   ARTICLE III
                                      LOANS
SECTION 3.01.  Loans...........................................................................20
SECTION 3.02.  Conversion of Loans.............................................................22
SECTION 3.03.  Interest Periods................................................................22
SECTION 3.04.  Other Terms Relating to the Making and Conversion of Loans......................22
SECTION 3.05.  Repayment of Loans; Interest....................................................25

                                   ARTICLE IV
                                LETTERS OF CREDIT
SECTION 4.01.  Issuing Banks...................................................................25
SECTION 4.02.  Letters of Credit...............................................................26
SECTION 4.03.  Issuing Bank Fees...............................................................26
SECTION 4.04.  Reimbursement to Issuing Banks..................................................26
SECTION 4.05.  Obligations Absolute............................................................27
SECTION 4.06.  Liability of Issuing Banks and the Lenders......................................28

                                    ARTICLE V
                   PAYMENTS, COMPUTATIONS AND YIELD PROTECTION
SECTION 5.01.  Payments and Computations.......................................................29
SECTION 5.02.  Interest Rate Determination.....................................................30
SECTION 5.03.  Prepayments.....................................................................30
SECTION 5.04.  Yield Protection................................................................31
SECTION 5.05.  Sharing of Payments, Etc........................................................32
SECTION 5.06.  Taxes...........................................................................33

                                   ARTICLE VI
                              CONDITIONS PRECEDENT
SECTION 6.01.  Conditions Precedent to the Initial Extension of Credit.........................34


                                        i
   3

                                TABLE OF CONTENTS


Section                                                                                      Page
                                                                                       
SECTION 6.02.  Conditions Precedent to Each Extension of Credit................................36
SECTION 6.03.  Conditions Precedent to Certain Extensions of Credit............................37
SECTION 6.04.  Reliance on Certificates........................................................38

                                   ARTICLE VII
                         REPRESENTATIONS AND WARRANTIES
SECTION 7.01.  Representations and Warranties of the Borrower..................................38

                                  ARTICLE VIII
                            COVENANTS OF THE BORROWER
SECTION 8.01.  Affirmative Covenants...........................................................41
SECTION 8.02.  Negative Covenants..............................................................43
SECTION 8.03.  Reporting Obligations...........................................................47

                                   ARTICLE IX
                                    DEFAULTS
SECTION 9.01.  Events of Default...............................................................50
SECTION 9.02.  Remedies........................................................................52

                                    ARTICLE X
                                   THE AGENTS
SECTION 10.01.  Authorization and Action.......................................................53
SECTION 10.02.  Indemnification................................................................54

                                   ARTICLE XI
                                  MISCELLANEOUS
SECTION 11.01.  Amendments, Etc................................................................55
SECTION 11.02.  Notices, Etc...................................................................55
SECTION 11.03.  No Waiver of Remedies..........................................................56
SECTION 11.04.  Costs, Expenses and Indemnification............................................56
SECTION 11.05.  Right of Set-off...............................................................57
SECTION 11.06.  Binding Effect.................................................................58
SECTION 11.07.  Assignments and Participation..................................................58
SECTION 11.08.  Confidentiality................................................................62
SECTION 11.09.  Waiver of Jury Trial...........................................................62
SECTION 11.10.  Governing Law; Submission to Jurisdiction......................................62
SECTION 11.11.  Relation of the Parties; No Beneficiary........................................63
SECTION 11.12.  Existing Banks' Waiver, Acknowledgment and Release.............................63
SECTION 11.13.  Execution in Counterparts......................................................63
SECTION 11.14.  Survival of Agreement..........................................................63


                                       ii



   4
                                TABLE OF CONTENTS (cont'd)


Section                                                                                      Page
                                                                                       

Exhibits

EXHIBIT A -     Form of Notice of Borrowing
EXHIBIT B -     Form of Notice of Conversion
EXHIBIT C -     Form of  Cash Collateral Agreement
EXHIBIT D -     Form of Opinion of Michael D.VanHemert, Esq., counsel of the
                Borrower
EXHIBIT E -     Form of Opinion of Sidley & Austin, counsel to the
                Administrative Agent
EXHIBIT F -     Form of Compliance Schedule
EXHIBIT G -     Form of Lender Assignment
EXHIBIT H -     Terms of Subordination (Junior Subordinated Debt)
EXHIBIT I -     Terms of Subordination (Guaranty of Hybrid Preferred Securities)


Schedules

SCHEDULE I      Applicable Lending Offices
SCHEDULE II     Certain Debt
SCHEDULE III    Existing Letters of Credit







                                      iii
   5
                                CREDIT AGREEMENT

                            Dated as of June 27, 2000




          THIS CREDIT AGREEMENT is made by and among:

         (i)    CMS Energy Corporation, a Michigan corporation(the "BORROWER"),

         (ii)   the banks (the "BANKS") listed on the signature pages hereof and
                the other Lenders (as hereinafter defined) from time to time
                party hereto,

         (iii)  The Chase Manhattan Bank ("CHASE"), as administrative agent (the
                "ADMINISTRATIVE AGENT") and collateral agent (the "COLLATERAL
                AGENT") for the Lenders hereunder, and

         (iv)   Bank of America, N.A. and Barclays Bank plc, as co-syndication
                agents (the "CO-SYNDICATION AGENTS"), and Citibank,  N.A., as
                documentation agent (the "DOCUMENTATION AGENT").


                             PRELIMINARY STATEMENTS

         The Borrower has requested the Banks to provide the credit facility
hereinafter described in the amount and on the terms and conditions set forth
herein. The Banks have so agreed on the terms and conditions set forth herein,
and the Agents have agreed to act as agents for the Lenders on such terms and
conditions.

         The parties hereto acknowledge and agree that neither Consumers (as
hereinafter defined) nor any of its Subsidiaries (as hereinafter defined) will
be a party to, or will in any way be bound by any provision of, this Agreement
or any other Loan Document (as hereinafter defined), and that no Loan Document
will be enforceable against Consumers or any of its Subsidiaries or their
respective assets.

         Accordingly, the parties hereto agree as follows:

                                   ARTICLE I
                        DEFINITIONS AND ACCOUNTING TERMS

        SECTION 1.01. CERTAIN DEFINED TERMS. As used in this Agreement, the
following terms shall have the following meanings:

                  "ABR", when used in reference to any Loan or Borrowing, refers
         to whether such Loan, or the Loans comprising such Borrowing, are
         bearing interest at a rate determined by reference to the Alternate
         Base Rate.

   6
                  "ABR LOAN" means a Loan that bears interest as provided in
         Section 3.05(b)(i).

                  "ADJUSTED LIBO RATE" means, for each Interest Period for each
         Eurodollar Rate Loan made as part of the same Borrowing, an interest
         rate per annum (rounded upwards, if necessary, to the next 1/16 of 1%)
         equal to (a) the LIBO Rate for such Interest Period multiplied by (b)
         the Statutory Reserve Rate.

                  "ADMINISTRATIVE QUESTIONNAIRE" means an Administrative
         Questionnaire in a form supplied by the Administrative Agent.

                  "AFFILIATE" means, with respect to any Person, any other
         Person directly or indirectly controlling (including but not limited to
         all directors and officers of such Person), controlled by, or under
         direct or indirect common control with such Person. A Person shall be
         deemed to control another entity if such Person possesses, directly or
         indirectly, the power to direct or cause the direction of the
         management and policies of such entity, whether through the ownership
         of voting securities, by contract, or otherwise.

                  "AGENT" means, as the context may require, the Administrative
         Agent, the Collateral Agent, any Co-Syndication Agent or the
         Documentation Agent, and "AGENTS" means any or all of the foregoing.

                  "ALTERNATE BASE RATE" means, for any day, a rate per annum
         equal to the greatest of (a) the Prime Rate in effect on such day, (b)
         the Base CD Rate in effect on such day plus 1% and (c) the Federal
         Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change
         in the Alternate Base Rate due to a change in the Prime Rate, the Base
         CD Rate or the Federal Funds Effective Rate shall be effective from and
         including the effective date of such change in the Prime Rate, the Base
         CD Rate or the Federal Funds Effective Rate, respectively.

                  "APPLICABLE LENDING OFFICE" means, with respect to each
         Lender, (i) such Lender's Domestic Lending Office, in the case of an
         ABR Loan, and (ii) such Lender's Eurodollar Lending Office, in the case
         of a Eurodollar Rate Loan.

                  "APPLICABLE MARGIN" means, on any date of determination with
         respect to any Loans, (i) 0.50% per annum in the case of ABR Loans and
         (ii) 1.50% per annum in the case of Eurodollar Rate Loans.


                  Notwithstanding the foregoing, each of the foregoing
         Applicable Margins shall be (i) 1.00% per annum in the case of ABR
         Loans and 2.00% per annum in the case of Eurodollar Rate Loans, in the
         event that, and at all times during which, the Index Debt shall be
         rated BB- (or its equivalent) or lower by any two of S&P, Fitch,
         Moody's and D&P, provided that one of such two rating agencies is S&P
         or Moody's, and (ii) 0.25% per annum in the case of ABR Loans and 1.25%
         per annum in the case of Eurodollar Rate Loans, in the event that, and
         at all times during which, the Index Debt shall be rated BBB- (or its
         equivalent) or higher by any two of S&P, Fitch, Moody's and D&P,
         provided that one of such two rating agencies is S&P or Moody's. The
         Applicable Margins shall be increased or decreased in accordance with
         this definition upon any change in the applicable ratings of the Index
         Debt, and such increased or decreased

                                        2

   7
         Applicable  Margins  shall be effective from the date of  announcement
         of any such new ratings.  The Borrower agrees to notify the
         Administrative  Agent promptly after each change in any rating of the
         Index Debt.

                  "APPLICABLE RATE" means:

                           (i) in the case of each ABR Loan, a rate per annum
                  equal at all times to the sum of the Alternate Base Rate in
                  effect from time to time plus the Applicable Margin; and

                           (ii) in the case of each Eurodollar Rate Loan
                  comprising part of the same Borrowing, a rate per annum during
                  each Interest Period equal at all times to the sum of the
                  Adjusted LIBO Rate for such Interest Period plus the
                  Applicable Margin.

                  "ARRANGER" means Chase Securities Inc.

                  "ASSESSMENT RATE" means, for any day, the annual assessment
         rate in effect on such day that is payable by a member of the Bank
         Insurance Fund classified as "well capitalized" and within supervisory
         subgroup "B" (or a comparable successor risk classification) within the
         meaning of 12 C.F.R. Part 327 (or any successor provision) to the
         Federal Deposit Insurance Corporation for insurance by such Corporation
         of time deposits made in Dollars at the offices of such member in the
         United States; provided that if, as a result of any change in law, rule
         or regulation, it is no longer possible to determine the Assessment
         Rate as aforesaid, then the Assessment Rate shall be such annual rate
         as shall be determined by the Administrative Agent to be representative
         of the cost of such insurance to the Lenders.

                  "AVAILABLE COMMITMENT" means, for each Lender on any day, the
         unused portion of such Lender's Commitment, computed after giving
         effect to all Extensions of Credit or prepayments to be made on such
         day and the application of proceeds therefrom. "AVAILABLE COMMITMENTS"
         means the aggregate of the Lenders' Available Commitments.

                  "BASE CD RATE" means the sum of (i) the Three-Month Secondary
         CD Rate multiplied by the Statutory Reserve Rate plus (ii) the
         Assessment Rate.

                  "BOARD" means the Board of Governors of the Federal Reserve
         System of the United States of America.

                  "BORROWER INTEREST EXPENSE" means at any date, the total
         interest expense in respect of Debt of the Borrower for the four
         calendar quarters immediately preceding such date, including, without
         duplication, (i) interest expense attributable to capital leases, (ii)
         amortization of debt discount, (iii) capitalized interest, (iv) cash
         and noncash payments, (v) commissions, discounts and other fees and
         charges owed with respect to letters of credit and bankers' acceptance
         financing, (vi) net costs under interest rate swap, "cap", "collar" or
         other hedging agreements (including amortization of discount) and (vii)
         interest expense in respect of obligations of Persons deemed to be Debt
         of the Borrower under clause (viii) of the definition of Debt,
         provided, however that Borrower Interest

                                        3

   8
        Expense shall exclude any costs otherwise included in interest expense
        recognized on early retirement of debt.

                  "BORROWING" means a borrowing consisting of Loans of the same
         Type, having the same Interest Period and made or Converted on the same
         day by the Lenders, ratably in accordance with their respective
         Percentages. Any Borrowing consisting of Loans of a particular Type may
         be referred to as being a Borrowing of such "TYPE". All Loans of the
         same Type, having the same Interest Period and made or Converted on the
         same day shall be deemed a single Borrowing hereunder until repaid or
         next Converted.

                  "BUSINESS DAY" means a day of the year on which banks are not
         required or authorized to close in New York City and Detroit, Michigan,
         and, if the applicable Business Day relates to any Eurodollar Rate
         Loan, on which dealings are carried on in the London interbank market.

                  "CASH COLLATERAL AGREEMENT" means the Cash Collateral
         Agreement, dated as of the date hereof, between the Borrower and the
         Collateral Agent, for the benefit of the Lenders, substantially in the
         form of Exhibit C.

                  "CASH DIVIDEND INCOME" means, for any period, the amount of
         all cash dividends received by the Borrower from its Subsidiaries
         during such period that are paid out of the net income (without giving
         effect to: any extraordinary gains in excess of $25,000,000, the amount
         of any write-off or write-down of assets, and up to $200,000,000 of
         other non-cash write-offs) of such Subsidiaries during such period.

                  "CLOSING DATE" means the date of the initial Borrowing
         hereunder. All transactions contemplated by the Closing Date shall take
         place on or before June 30, 2000, or such other time as the parties
         hereto may mutually agree.

                  "COLLATERAL" means the "Collateral" under the Cash Collateral
         Agreement.

                  "COMMITMENT" means, for each Lender, the obligation of such
         Lender to make Loans to the Borrower and to participate in Extensions
         of Credit resulting from the issuance (or extension, modification or
         amendment) of any Letter of Credit in an aggregate amount no greater
         than the amount set forth opposite such Lender's name on the signature
         pages hereof under the heading "Commitment" or, if such Lender has
         entered into one or more Lender Assignments, set forth for such Lender
         in the Register maintained by the Administrative Agent pursuant to
         Section 11.07(c), in each such case as such amount may be reduced from
         time to time pursuant to Section 2.03. "COMMITMENTS" means the total of
         the Lenders' Commitments hereunder. The Commitments shall in no event
         exceed $1,000,000,000.

                  "CONFIDENTIAL INFORMATION" has the meaning assigned to that
         term in Section 11.08.

                  "CONSOLIDATED DEBT" means, without duplication, at any date of
         determination, the sum of the aggregate Debt of the Borrower plus the
         aggregate debt (as such term is

                                        4
   9
        construed in accordance with GAAP) of the Consolidated Subsidiaries;
        provided, however, that:

                           (a) Consolidated Debt shall not include any Support
                  Obligation described in clause (iv) or (v) of the definition
                  thereof if such Support Obligation or the primary obligation
                  so supported is not fixed or conclusively determined or is not
                  otherwise reasonably quantifiable as of the date of
                  determination;

                           (b) Consolidated Debt shall not include (i) any
                  Junior Subordinated Debt owned by any Hybrid Preferred
                  Securities Subsidiary or (ii) any guaranty by the Borrower of
                  payments with respect to any Hybrid Preferred Securities,
                  provided that such guaranty is subordinated to the rights of
                  the Lenders hereunder and under the other Loan Documents
                  pursuant to terms of subordination substantially similar to
                  those set forth in Exhibit I, or pursuant to other terms and
                  conditions satisfactory to the Required Lenders;

                           (c) for purposes of this definition only, the
                  percentage of the Net Proceeds from any issuance of hybrid
                  debt/equity securities (other than Junior Subordinated Debt
                  and Hybrid Preferred Securities) by the Borrower or any
                  Consolidated Subsidiary that shall be considered Consolidated
                  Debt shall be agreed by the Administrative Agent and the
                  Borrower (and consented to by the Required Lenders) and shall
                  be based on, among other things, the treatment (if any) given
                  to such hybrid securities by the rating agencies;

                           (d) with respect to any Support Obligations provided
                  by the Borrower in connection with a purchase or sale by MS&T,
                  its Subsidiaries or PremStar Energy Canada Ltd. ("PREMSTAR")
                  of natural gas, natural gas liquids, gas condensates,
                  electricity, oil, propane, coal, any other commodity, weather
                  derivatives or any derivative instrument with respect to any
                  commodity with any other Person (a "COUNTERPARTY"),
                  Consolidated Debt shall include only the excess, if any, of
                  (A) the aggregate amount of any Support Obligations provided
                  by the Borrower in respect of MS&T's, any of its Subsidiary's
                  or PremStar's obligations under any such purchase or sale
                  transaction (a "COVERING TRANSACTION") entered into by MS&T,
                  any of its Subsidiaries or PremStar in connection with such
                  purchase or sale over (B) the aggregate amount of (i) any
                  Support Obligations provided by the direct or indirect parent
                  company of such Counterparty (the "COUNTERPARTY GUARANTOR")
                  and (ii) any irrevocable letter of credit provided by any
                  financial institution for the account of such Counterparty or
                  Counterparty Guarantor, in each case for the benefit of MS&T,
                  any of its Subsidiaries or PremStar in support of such
                  Counterparty's payment obligations to MS&T, such Subsidiary or
                  PremStar arising from such purchase or sale, provided that (x)
                  the senior, unsecured, non-credit enhanced indebtedness of
                  such Counterparty Guarantor or such financial institution (as
                  the case may be) is rated BBB- (or its equivalent) or higher
                  by any two of S&P, Fitch, Moody's and D&P (provided that one
                  of such two rating agencies is S&P or Moody's), provided that
                  in the event that such Counterparty Guarantor has no such
                  rated indebtedness, Dun & Bradstreet Inc. has rated such
                  Counterparty Guarantor at least investment grade,

                                       5

   10

                  (y) no default by such Counterparty Guarantor in respect of
                  any such Support Obligations provided by such Counterparty
                  Guarantor has occurred and is continuing and (z) such
                  Counterparty Guarantor is not the Borrower or any Affiliate of
                  the Borrower or any of its Subsidiaries; and

                           (e) Consolidated Debt shall not include any Project
                  Finance Debt of the Borrower or any Consolidated Subsidiary.

                  "CONSOLIDATED EBITDA" means, with reference to any period, the
         pretax operating income of the Borrower and its Subsidiaries ("PRETAX
         OPERATING INCOME") for such period plus, to the extent deducted in
         determining Pretax Operating Income (without duplication), (i)
         depreciation, depletion and amortization, and (ii) any non-cash
         write-offs and write-downs contained in the Borrower's Pretax Operating
         Income, all calculated for the Borrower and its Subsidiaries on a
         consolidated basis for such period.

                  "CONSOLIDATED SUBSIDIARY" means any Subsidiary whose accounts
         are or are required to be consolidated with the accounts of the
         Borrower in accordance with GAAP.

                  "CONSUMERS" means Consumers Energy Company, a Michigan
         corporation, all of whose common stock is on the date hereof owned by
         the Borrower.

                  "CONSUMERS DIVIDEND RESTRICTION" means any restriction enacted
         or imposed after October 1, 1992 upon the ability of Consumers to pay
         cash dividends to the Borrower in respect of Consumers' capital stock,
         whether such restriction is imposed by statute, regulation, decisions
         or rulings by the Michigan Public Service Commission or the Federal
         Energy Regulatory Commission (or any successor agency or agencies),
         final judgments of any court of competent jurisdiction, indentures,
         agreements, contracts or restrictions to which Consumers is a party or
         by which it is bound or otherwise; provided, that no restriction on
         such dividends existing on October 1, 1992 shall be a Consumers
         Dividend Restriction at any time.

                  "CONVERSION", "CONVERT" or "CONVERTED" refers to a conversion
         of Loans of one Type into Loans of another Type, or to the selection of
         a new, or the renewal of the same, Interest Period for Loans, as the
         case may be, pursuant to Section 3.02 or 3.03.

                  "D&P" means Duff & Phelps, Inc. or any successor thereto.

                  "DEBT" means, for any Person, without duplication, any and all
         indebtedness, liabilities and other monetary obligations of such Person
         (whether for principal, interest, fees, costs, expenses or otherwise,
         and whether contingent or otherwise) (i) for borrowed money or
         evidenced by bonds, debentures, notes or other similar instruments,
         (ii) to pay the deferred purchase price of property or services (except
         trade accounts payable arising in the ordinary course of business which
         are not overdue), (iii) as lessee under leases which shall have been or
         should be, in accordance with GAAP, recorded as capital leases, (iv)
         under reimbursement or similar agreements with respect to letters of
         credit issued thereunder, (v) under any interest rate swap, "cap",
         "collar" or other hedging agreements; provided, however, for purposes
         of the calculation of Debt for this clause (v) only, the actual amount
         of Debt of such Person shall be determined on a net basis to the extent


                                        6
   11


         such agreements permit such amounts to be calculated on a net basis,
         (vi) to pay rent or other amounts under leases entered into in
         connection with sale and leaseback transactions involving assets of
         such Person being sold in connection therewith, (vii) arising from any
         accumulated funding deficiency (as defined in Section 412(a) of the
         Internal Revenue Code of 1986, as amended) for a Plan, (viii) arising
         in connection with any withdrawal liability under ERISA to any
         Multiemployer Plan and (ix) arising from (A) direct or indirect
         guaranties in respect of, and obligations to purchase or otherwise
         acquire, or otherwise to warrant or hold harmless, pursuant to a
         legally binding agreement, a creditor against loss in respect of, Debt
         of others referred to in clauses (i) through (viii) above and (B) other
         guaranty or similar financial obligations in respect of the performance
         of others, including Support Obligations. Notwithstanding the
         foregoing, solely for purposes of the calculation required under
         Section 8.01(j)(ii), Debt shall not include any Junior Subordinated
         Debt issued by the Borrower and owned by any Hybrid Preferred
         Securities Subsidiary.

                  "DEFAULT" means an event that, with the giving of notice or
         lapse of time or both, would constitute an Event of Default.

                  "DEFAULT RATE" means a rate per annum equal at all times to
         (i) in the case of any amount of principal of any Loan that is not paid
         when due, 2% per annum above the Applicable Rate required to be paid on
         such Loan immediately prior to the date on which such amount became
         due, and (ii) in the case of any amount of interest, fees or other
         amounts payable hereunder that is not paid when due, 2% per annum above
         the Applicable Rate for an ABR Loan in effect from time to time.

                  "DIVIDEND COVERAGE RATIO" means, at any date, the ratio of (i)
         Pro Forma Dividend Amounts to (ii) Borrower Interest Expense.

                  "DOLLARS" and the sign "$" each means lawful money of the
         United States.

                  "DOMESTIC LENDING OFFICE" means, with respect to any Lender,
         the office or affiliate of such Lender specified as its "Domestic
         Lending Office" opposite its name on Schedule I hereto or in the Lender
         Assignment pursuant to which it became a Lender, or such other office
         or affiliate of such Lender as such Lender may from time to time
         specify in writing to the Borrower and the Administrative Agent.

                  "ELIGIBLE ASSIGNEE" means (a) a commercial bank or trust
         company organized under the laws of the United States, or any State
         thereof; (b) a commercial bank organized under the laws of any other
         country that is a member of the OECD, or a political subdivision of any
         such country, provided that such bank is acting through a branch or
         agency located in the United States; (c) the central bank of any
         country that is a member of the OECD; and (d) any other commercial bank
         or other financial institution engaged generally in the business of
         extending credit or purchasing debt instruments; provided, however,
         that (A) any such Person shall also (i) have outstanding unsecured
         indebtedness that is rated A- or better by S&P or A3 or better by
         Moody's (or an equivalent rating by another nationally-recognized
         credit rating agency of similar standing if neither of such
         corporations is then in the business of rating unsecured


                                       7

   12
         indebtedness of entities engaged in such businesses) or (ii) have
         combined capital and surplus (as established in its most recent report
         of condition to its primary regulator) of not less than $250,000,000
         (or its equivalent in foreign currency), (B) any Person described in
         clause (b), (c), or (d) above, shall, on the date on which it is to
         become a Lender hereunder, (1) be entitled to receive payments
         hereunder without deduction or withholding of any United States Federal
         income taxes (as contemplated by Section 5.06) and (2) not be incurring
         any losses, costs or expenses of the type for which such Person could
         demand payment under Section 5.04(a) or (c) (except to the extent that,
         in the absence of the making of an assignment to such Person, the
         assigning Lender would have incurred an equal or greater amount of such
         losses, costs or expenses and such losses, costs or expenses would have
         been payable by the Borrower to such assigning Lender hereunder), (C)
         any Person described in clauses (a), (b), (c) and (d) above, which is
         not a Lender shall, in addition, be acceptable to any Issuing Bank
         based upon its then-existing credit criteria and (D) any Person
         described in clause (d) above shall, in addition, be acceptable to the
         Administrative Agent.

                  "ENTERPRISES" means CMS Enterprises Company, a Michigan
         corporation, all of whose common stock is on the date hereof owned by
         the Borrower.

                  "ENTERPRISES SIGNIFICANT SUBSIDIARY" means CMS Oil & Gas Co.,
         CMS Generation Co., CMS Gas Transmission and Storage Company, Panhandle
         Eastern Pipe Line Company ("PANHANDLE"), any direct or indirect
         subsidiary of Panhandle and any other direct subsidiary of Enterprises
         having a net worth in excess of $50 million.

                  "ENVIRONMENTAL LAWS" means all laws, rules, regulations,
         codes, ordinances, orders, decrees, judgments, injunctions, notices or
         binding agreements issued, promulgated or entered into by any
         governmental agency or authority, relating in any way to the
         environment, preservation or reclamation of natural resources, the
         management, release or threatened release of any Hazardous Substance or
         to health and safety matters.

                  "ENVIRONMENTAL LIABILITY" means any liability, contingent or
         otherwise (including any liability for damages, costs of environmental
         remediation, fines, penalties or indemnities), of the Borrower or any
         of its Subsidiaries directly or indirectly resulting from or based upon
         (a) violation of any Environmental Law, (b) the generation, use,
         handling, transportation, storage, treatment or disposal of any
         Hazardous Substances, (c) exposure to any Hazardous Substances, (d) the
         release or threatened release of any Hazardous Substances into the
         environment or (e) any contract, agreement or other consensual
         arrangement pursuant to which liability is assumed or imposed with
         respect to any of the foregoing.

                  "EQUITY DISTRIBUTIONS" shall mean, for any period, the
         aggregate amount of cash received by the Borrower from its Subsidiaries
         during such period that are paid out of proceeds from the sale of
         common equity of Subsidiaries of the Borrower.

                  "ERISA" means the Employee Retirement Income Security Act of
         1974, as amended from time to time.


                                       8

   13

                  "ERISA AFFILIATE" means, with respect to any Person, any trade
         or business (whether or not incorporated) that is a "commonly
         controlled entity" within the meaning of the regulations under Section
         414 of the Internal Revenue Code of 1986, as amended.

                  "EURODOLLAR", when used in reference to any Loan or Borrowing,
         refers to whether such Loan, or the Loans comprising such Borrowing,
         are bearing interest at a rate determined by reference to the Adjusted
         LIBO Rate.

                  "EURODOLLAR LENDING OFFICE" means, with respect to any Lender,
         the office or affiliate of such Lender specified as its "Eurodollar
         Lending Office" opposite its name on Schedule I hereto or in the Lender
         Assignment pursuant to which it became a Lender (or, if no such office
         or affiliate is specified, its Domestic Lending Office), or such other
         office or affiliate of such Lender as such Lender may from time to time
         specify in writing to the Borrower and the Administrative Agent.

                  "EURODOLLAR RATE LOAN" means a Loan that bears interest as
         provided in Section 3.05(b)(ii).

                  "EVENT OF DEFAULT" has the meaning specified in Section 9.01.

                  "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
         amended.

                  "EXISTING BANKS" means the Banks party to the Existing Credit
         Agreement.

                  "EXISTING CREDIT AGREEMENT" means the Credit Agreement, dated
         as of July 2, 1997, among the Borrower, the lenders party thereto,
         Chase, as Administrative Agent, and the other co-agents party thereto,
         as the same may have been amended, restated, supplemented or otherwise
         modified from time to time.

                  "EXISTING LETTERS OF CREDIT" means those letters of credit
         identified on Schedule III hereto. The Existing Letters of Credit shall
         each constitute a Letter of Credit hereunder.

                  "EXTENSION OF CREDIT" means (i) the making of a Borrowing
         (including any Conversion), (ii) the issuance of a Letter of Credit, or
         (iii) the amendment of any Letter of Credit having the effect of
         extending the stated termination date thereof, increasing the LC
         Outstandings thereunder, or otherwise altering any of the material
         terms or conditions thereof.

                  "FEDERAL FUNDS EFFECTIVE RATE" means, for any day, the
         weighted average (rounded upwards, if necessary, to the next 1/100 of
         1%) of the rates on overnight Federal funds transactions with members
         of the Federal Reserve System arranged by Federal funds brokers, as
         published on the next succeeding Business Day by the Federal Reserve
         Bank of New York, or, if such rate is not so published for any day that
         is a Business Day, the average (rounded upwards, if necessary, to the
         next 1/100 of 1%) of the quotations for such day for such transactions
         received by the Administrative Agent from three Federal funds brokers
         of recognized standing selected by it.


                                       9
   14

                  "FEE LETTER" has the meaning assigned to that term in Section
         2.02(c).

                  "FITCH" means Fitch IBCA, Inc. or any successor thereto.

                  "FOREIGN LENDER" means any Lender that is organized under the
         laws of a jurisdiction other than that in which the Borrower is
         located. For purposes of this definition, the United States of America,
         each State thereof and the District of Columbia shall be deemed to
         constitute a single jurisdiction.

                  "GAAP" has the meaning assigned to that term in Section 1.03.

                  "GOVERNMENTAL APPROVAL" means any authorization, consent,
         approval, license, permit, certificate, exemption of, or filing or
         registration with, any governmental authority or other legal or
         regulatory body, required in connection with either (i) the execution,
         delivery, or performance of any Loan Document by the Borrower, (ii) the
         grant and perfection of any Lien contemplated by the Cash Collateral
         Agreement or (iii) the exercise by any Agent (on behalf of the Lenders)
         of any right or remedy provided for under the Cash Collateral
         Agreement.

                  "HAZARDOUS SUBSTANCE" means any waste, substance, or material
         identified as hazardous, dangerous or toxic by any office, agency,
         department, commission, board, bureau, or instrumentality of the United
         States or of the State or locality in which the same is located having
         or exercising jurisdiction over such waste, substance or material.

                  "HYBRID PREFERRED SECURITIES" means any preferred securities
         issued by a Hybrid Preferred Securities Subsidiary, where such
         preferred securities have the following characteristics:

                           (i) such Hybrid Preferred Securities Subsidiary lends
                  substantially all of the proceeds from the issuance of such
                  preferred securities to the Borrower or a wholly-owned direct
                  or indirect Subsidiary of the Borrower in exchange for Junior
                  Subordinated Debt issued by the Borrower or such wholly-owned
                  direct or indirect Subsidiary, respectively;

                           (ii) such preferred securities contain terms
                  providing for the deferral of interest payments corresponding
                  to provisions providing for the deferral of interest payments
                  on the Junior Subordinated Debt; and

                           (iii) the Borrower or a wholly-owned direct or
                  indirect Subsidiary of the Borrower (as the case may be) makes
                  periodic interest payments on the Junior Subordinated Debt,
                  which interest payments are in turn used by the Hybrid
                  Preferred Securities Subsidiary to make corresponding payments
                  to the holders of the preferred securities.

                  "HYBRID PREFERRED SECURITIES SUBSIDIARY" means any Delaware
         business trust (or similar entity) (i) all of the common equity
         interest of which is owned (either directly or indirectly through one
         or more wholly-owned Subsidiaries of the Borrower or Consumers) at all
         times by the Borrower or a wholly-owned direct or indirect Subsidiary


                                       10

   15
         of the Borrower, (ii) that has been formed for the purpose of issuing
         Hybrid Preferred Securities and (iii) substantially all of the assets
         of which consist at all times solely of Junior Subordinated Debt issued
         by the Borrower or a wholly-owned direct or indirect Subsidiary of the
         Borrower (as the case may be) and payments made from time to time on
         such Junior Subordinated Debt.

                  "INDEMNIFIED PERSON" has the meaning assigned to that term in
         Section 11.04(b).

                  "INDENTURE" means that certain Indenture, dated as of
         September 15, 1992, between the Borrower and the Trustee, as
         supplemented by the First Supplemental Indenture, dated as of October
         1, 1992, the Second Supplemental Indenture, dated as of October 1,
         1992, the Third Supplemental Indenture, dated as of May 6, 1997, the
         Fourth Supplemental Indenture, dated as of September 26, 1997, the
         Fifth Supplemental Indenture, dated as of November 4, 1997, the Sixth
         Supplemental Indenture, dated as of January 13, 1998, the Seventh
         Supplemental Indenture, dated as of January 25, 1999, the Eighth
         Supplemental Indenture, dated as of February 3, 1999, and the Ninth
         Supplemental Indenture, dated as of June 22, 1999, as said Indenture
         may be further amended or otherwise modified from time to time in
         accordance with its terms.

                  "INDEX DEBT" means senior, unsecured indebtedness for borrowed
         money of the Borrower that is not guaranteed by any other Person or
         subject to any other credit enhancement.

                  "INTEREST PERIOD" has the meaning assigned to that term in
         Section 3.03.

                  "ISSUING BANK" means (i) any Lender designated by the Borrower
         in accordance with Section 4.01(a) as the issuer of a Letter of Credit
         pursuant to an Issuing Bank Agreement and (ii) any other financial
         institution that has issued an Existing Letter of Credit pursuant to an
         Issuing Bank Agreement (provided, however, that unless such other
         financial institution is a Lender hereunder, it shall not be permitted
         to issue any Letters of Credit after the date hereof). As of the date
         hereof, the Borrower has designated Chase as an Issuing Bank, and the
         Administrative Agent has accepted such designee pursuant to Section
         4.01.

                  "ISSUING BANK AGREEMENT" means an agreement between an Issuing
         Bank and the Borrower, in form and substance satisfactory to the
         Administrative Agent, providing for the issuance of one or more Letters
         of Credit, in form and substance satisfactory to the Administrative
         Agent, in support of a general corporate activity of the Borrower.

                  "JUNIOR SUBORDINATED DEBT" means any unsecured Debt of the
         Borrower or a Subsidiary of the Borrower (i) issued in exchange for the
         proceeds of Hybrid Preferred Securities and (ii) subordinated to the
         rights of the Lenders hereunder and under the other Loan Documents
         pursuant to terms of subordination substantially similar to those set
         forth in Exhibit H, or pursuant to other terms and conditions
         satisfactory to the Required Lenders.

                  "LC PAYMENT NOTICE" has the meaning assigned to that term in
         Section 4.04(b).

                                       11

   16

                  "LC OUTSTANDINGS" means, for any Letter of Credit on any date
         of determination, the maximum amount available to be drawn under such
         Letter of Credit (assuming the satisfaction of all conditions for
         drawing enumerated therein) plus any amount which has been drawn on
         such Letter of Credit which has neither been reimbursed by the Borrower
         nor converted into an ABR Loan pursuant to the terms of Section 4.04.

                  "LENDER ASSIGNMENT" means an assignment and agreement entered
         into by a Lender and an Eligible Assignee, and accepted by the
         Administrative Agent, in substantially the form of Exhibit G.

                  "LENDERS" means the Banks listed on the signature pages
         hereof, each Eligible Assignee that shall become a party hereto
         pursuant to Section 11.07 and, if and to the extent so provided in
         Section 4.04(c), each Issuing Bank.

                  "LETTER OF CREDIT" means a letter of credit issued by an
         Issuing Bank pursuant to Section 4.02, as such letter of credit may
         from time to time be amended, modified or extended in accordance with
         the terms of this Agreement and the Issuing Bank Agreement to which it
         relates.

                  "LIBO RATE" means, with respect to any Eurodollar Borrowing
         for any Interest Period, the rate appearing on Page 3750 of the
         Telerate Service (or on any successor or substitute page of such
         Service, or any successor to or substitute for such Service, providing
         rate quotations comparable to those currently provided on such page of
         such Service, as determined by the Administrative Agent from time to
         time for purposes of providing quotations of interest rates applicable
         to dollar deposits in the London interbank market) at approximately
         11:00 a.m., London time, two Business Days prior to the commencement of
         such Interest Period, as the rate for dollar deposits with a maturity
         comparable to such Interest Period. In the event that such rate is not
         available at such time for any reason, then the "LIBO Rate" with
         respect to such Eurodollar Borrowing for such Interest Period shall be
         the rate at which dollar deposits of $5,000,000 and for a maturity
         comparable to such Interest Period are offered by the principal London
         office of the Administrative Agent in immediately available funds in
         the London interbank market at approximately 11:00 a.m., London time,
         two Business Days prior to the commencement of such Interest Period.

                  "LIEN" has the meaning assigned to that term in Section
         8.02(a).

                  "LOAN" means a loan by a Lender to the Borrower, and refers to
         an ABR Loan or a Eurodollar Rate Loan (each of which shall be a "TYPE"
         of Loan). All Loans by a Lender of the same Type having the same
         Interest Period and made or Converted on the same day shall be deemed
         to be a single Loan by such Lender until repaid or next Converted.

                  "LOAN DOCUMENTS" means this Agreement, any Promissory Notes,
         the Cash Collateral Agreement, the Fee Letter, the Issuing Bank
         Agreement(s) and all other agreements, instruments and documents now or
         hereafter executed and/or delivered pursuant hereto or thereto.



                                       12


   17
                  "MATERIAL ADVERSE CHANGE" means any event, development or
         circumstance that has had or could reasonably be expected to have a
         material adverse effect on (a) the business, assets, property,
         financial condition or results of operations of the Borrower and its
         Subsidiaries, considered as a whole, (b) the Borrower's ability to
         perform its obligations under this Agreement or any other Loan Document
         to which it is or will be a party or (c) the validity or enforceability
         of any Loan Document or the rights and remedies of any Agent or the
         Lenders thereunder.

                  "MEASUREMENT QUARTER" has the meaning assigned to that term in
         Section 8.01(i).

                  "MOODY'S" means Moody's Investors Service, Inc. or any
         successor thereto.

                  "MS&T" means CMS Marketing, Services and Trading Company, a
         Michigan corporation, all of whose capital stock is on the date hereof
         owned by Enterprises.

                  "MULTIEMPLOYER PLAN" means a multiemployer plan as defined in
         Section 4001(a)(3) of ERISA.

                  "NET PROCEEDS" means, with respect to any sale or issuance of
         securities or incurrence of Debt by any Person, the excess of (i) the
         gross cash proceeds received by or on behalf of such Person in respect
         of such sale, issuance or incurrence (as the case may be) over (ii)
         customary underwriting commissions, auditing and legal fees, printing
         costs, rating agency fees and other customary and reasonable fees and
         expenses incurred by such Person in connection therewith.

                  "NET WORTH" means, with respect to any Person, the excess of
         such Person's total assets over its total liabilities, total assets and
         total liabilities each to be determined in accordance with GAAP
         consistently applied, excluding, however, from the determination of
         total assets (i) goodwill, organizational expenses, research and
         development expenses, trademarks, trade names, copyrights, patents,
         patent applications, licenses and rights in any thereof, and other
         similar intangibles, (ii) cash held in a sinking or other analogous
         fund established for the purpose of redemption, retirement or
         prepayment of capital stock or Debt, and (iii) any items not included
         in clauses (i) or (ii) above, that are treated as intangibles in
         conformity with GAAP.

                  "NOTEHOLDERS" means, collectively, the owners of record from
         time to time of the Senior Notes.

                  "NOTICE OF BORROWING" has the meaning assigned to that term in
         Section 3.01(a).

                  "NOTICE OF CONVERSION" has the meaning assigned to that term
         in Section 3.02.

                  "OECD" means the Organization for Economic Cooperation and
         Development.

                  "OWNERSHIP INTEREST" of the Borrower in any Consolidated
         Subsidiary means, at any date of determination, the percentage
         determined by dividing (i) the aggregate amount of Project Finance
         Equity in such Consolidated Subsidiary owned or controlled, directly or
         indirectly, by the Borrower and any other Consolidated Subsidiary on
         such


                                       13

   18

         date, by (ii) the aggregate amount of Project Finance Equity in such
         Consolidated Subsidiary owned or controlled, directly or indirectly, by
         all Persons (including the Borrower and the Consolidated Subsidiaries)
         on such date. Notwithstanding anything to the contrary set forth above,
         if the "Ownership Interest," calculated as set forth above, is 50% or
         less, such percentage shall be deemed to equal 0%.

                  "PARTICIPANT" has the meaning assigned to that term in Section
         11.07(e).

                  "PBGC" means the Pension Benefit Guaranty Corporation (or any
         successor entity) established under ERISA.

                  "PERCENTAGE" means, for any Lender on any date of
         determination, the percentage obtained by dividing such Lender's
         Commitment on such day by the total of the Lenders' Commitments on such
         date, and multiplying the quotient so obtained by 100%. In the event
         that the Commitments have been terminated, each Lender's Percentage
         shall be calculated on the basis of the Commitments in effect
         immediately prior to such termination.

                  "PERMITTED INVESTMENTS" means each of the following so long as
         no such Permitted Investment shall have a final maturity later than six
         months from the date of investment therein:

                           (i) direct obligations of the United States, or of
                  any agency thereof, or obligations guaranteed as to principal
                  and interest by the United States or any agency thereof;

                           (ii) certificates of deposit or bankers' acceptances
                  issued, or time deposits held, or investment contracts
                  guaranteed, by any Lender, any nationally-recognized
                  securities dealer or any other commercial bank, trust company,
                  savings and loan association or savings bank organized under
                  the laws of the United States, or any State thereof, or of any
                  other country which is a member of the OECD, or a political
                  subdivision of any such country, and in each case having
                  outstanding unsecured indebtedness that (on the date of
                  acquisition thereof) is rated AA- or better by S&P or Aa3 or
                  better by Moody's (or an equivalent rating by another
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating unsecured bank indebtedness);

                           (iii) obligations with any Lender, any other bank or
                  trust company described in clause (ii), above, or any
                  nationally-recognized securities dealer, in respect of the
                  repurchase of obligations of the type described in clause (i),
                  above, provided that such repurchase obligations shall be
                  fully secured by obligations of the type described in said
                  clause (i) and the possession of such obligations shall be
                  transferred to, and segregated from other obligations owned
                  by, such Lender, such other bank or trust company or such
                  securities dealer;

                           (iv) commercial paper rated (on the date of
                  acquisition thereof) A-1 or P-1 or better by S&P or Moody's,
                  respectively (or an equivalent rating by another


                                       14

   19
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating commercial paper); and

                           (v) any eurodollar certificate of deposit issued by
                  any Lender or any other commercial bank, trust company,
                  savings and loan association or savings bank organized under
                  the laws of the United States, or any State thereof, or of any
                  country which is a member of the OECD, or a political
                  subdivision of any such country, and in each case having
                  outstanding unsecured indebtedness that (on the date of
                  acquisition thereof) is rated AA- or better by S&P or Aa3 or
                  better by Moody's (or an equivalent rating by another
                  nationally-recognized credit rating agency of similar standing
                  if neither of such corporations is then in the business of
                  rating unsecured bank indebtedness).

                  "PERSON" means an individual, partnership, corporation
         (including a business trust), joint stock company, limited liability
         company, trust, unincorporated association, joint venture or other
         entity, or a government or any political subdivision or agency thereof.

                  "PLAN" means, with respect to any Person, an employee benefit
         plan (other than a Multiemployer Plan) maintained for employees of such
         Person or any ERISA Affiliate of such Person and covered by Title IV of
         ERISA.

                  "PLAN TERMINATION EVENT" means, with respect to any Person,
         (i) a Reportable Event described in Section 4043 of ERISA and the
         regulations issued thereunder (other than a Reportable Event not
         subject to the provision for 30-day notice to the PBGC under such
         regulations), or (ii) the withdrawal of such Person or any of its ERISA
         Affiliates from a Plan during a plan year in which it was a
         "substantial employer" as defined in Section 4001(a)(2) of ERISA, or
         (iii) the filing of a notice of intent to terminate a Plan or the
         treatment of a Plan under Section 4041 of ERISA, or (iv) the
         institution of proceedings to terminate a Plan by the PBGC, or (v) any
         other event or condition which is reasonably likely to constitute
         grounds under Section 4042 of ERISA for the termination of, or the
         appointment of a trustee to administer, any Plan.

                  "PRIME RATE" means the rate of interest per annum publicly
         announced from time to time by Chase as its prime rate in effect at its
         principal office in New York City; each change in the Prime Rate shall
         be effective from and including the date such change is publicly
         announced as being effective.

                  "PRO FORMA DIVIDEND AMOUNT" means, from and after any date of
         any Consumers Dividend Restriction, the sum of (a) the aggregate amount
         which Consumers could have paid to the Borrower during the four
         calendar quarters immediately preceding such date had such Consumers
         Dividend Restriction been in effect during such quarters plus (b) cash
         dividends received by the Borrower from any other Subsidiary during
         such quarters.

                  "PROJECT FINANCE DEBT" means Debt of any Person that is
         non-recourse to such Person (unless such Person is a special-purpose
         entity) and any Affiliate of such Person,


                                       15

   20
         other than with respect to the interest of the holder of such Debt in
         the collateral, if any, securing such Debt.

                  "PROJECT FINANCE EQUITY" means, at any date of determination,
         consolidated equity of the common, preference and preferred
         stockholders of the Borrower and the Consolidated Subsidiaries relating
         to any obligor with respect to Project Finance Debt.

                  "PROMISSORY NOTE" means any promissory note of the Borrower
         payable to the order of a Lender (and, if requested, its registered
         assigns) issued pursuant to Section 3.01(d); and "PROMISSORY NOTES"
         means any or all of the foregoing.

                  "RECIPIENT" has the meaning assigned to that term in Section
         11.08.

                  "REGISTER" has the meaning specified in Section 11.07(c).

                  "RELATED PARTIES" means, with respect to any specified Person,
         such Person's Affiliates and the respective directors, officers,
         employees, agents and advisors of such Person and such Person's
         Affiliates.

                  "REQUEST FOR ISSUANCE" has the meaning assigned to that term
         in Section 4.02(a).

                  "REQUIRED LENDERS" means, on any date of determination,
         Lenders that, collectively, on such date (i) hold at least 51% of the
         then aggregate unpaid principal amount of the Loans owing to Lenders
         and (ii) if no Loans are then outstanding, have Percentages in the
         aggregate of at least 51%. Any determination of those Lenders
         constituting the Required Lenders shall be made by the Administrative
         Agent and shall be conclusive and binding on all parties absent
         manifest error.

                  "RESTRICTED SUBSIDIARY" means (i) Enterprises and (ii) any
         other Subsidiary of the Borrower (other than Consumers and its
         Subsidiaries) that, on a consolidated basis with any of its
         Subsidiaries as of any date of determination, accounts for more than
         10% of the consolidated assets of the Borrower and its Consolidated
         Subsidiaries.

                  "S&P" means Standard & Poor's Ratings Group, a division of The
         McGraw Hill Companies, Inc., or any successor thereto.

                  "SENIOR NOTE DEBT" means, collectively, all principal
         indebtedness of the Borrower to the Noteholders now or hereafter
         existing under the Senior Notes, together with interest and premiums,
         if any, thereon and other amounts payable in respect thereof or in
         connection therewith in accordance with the terms of the Senior Notes
         or the Indenture.

                  "SENIOR NOTES" means the 8-1/8% Senior Unsecured Notes Due
         2002, issued by the Borrower pursuant to the Indenture.

                  "STATUTORY RESERVE RATE" means a fraction (expressed as a
         decimal), the numerator of which is the number one and the denominator
         of which is the number one minus the aggregate of the maximum reserve
         percentages (including any marginal,


                                       16


   21

         special, emergency or supplemental reserves) expressed as a decimal
         established by the Board to which the Administrative Agent is subject
         (a) with respect to the Base CD Rate, for new negotiable nonpersonal
         time deposits in Dollars of over $100,000 with maturities approximately
         equal to three months and (b) with respect to the Adjusted LIBO Rate,
         for eurocurrency funding (currently referred to as "Eurocurrency
         Liabilities" in Regulation D of the Board). Such reserve percentages
         shall include those imposed pursuant to such Regulation D. Eurodollar
         Rate Loans shall be deemed to constitute eurocurrency funding and to be
         subject to such reserve requirements without benefit of or credit for
         proration, exemptions or offsets that may be available from time to
         time to any Lender under such Regulation D or any comparable
         regulation. The Statutory Reserve Rate shall be adjusted automatically
         on and as of the effective date of any change in any reserve
         percentage.

                  "SUBSIDIARY" means, with respect to any Person, any
         corporation or unincorporated entity of which more than 50% of the
         outstanding capital stock (or comparable interest) having ordinary
         voting power (irrespective of whether at the time capital stock (or
         comparable interest) of any other class or classes of such corporation
         or entity shall or might have voting power upon the occurrence of any
         contingency) is at the time directly or indirectly owned by said Person
         (whether directly or through one or more other Subsidiaries). In the
         case of an unincorporated entity, a Person shall be deemed to have more
         than 50% of interests having ordinary voting power only if such
         Person's vote in respect of such interests comprises more than 50% of
         the total voting power of all such interests in the unincorporated
         entity.

                  "SUPPORT OBLIGATIONS" means, for any Person, without
         duplication, any financial obligation, contingent or otherwise, of such
         Person guaranteeing or otherwise supporting any Debt or other
         obligation of any other Person in any manner, whether directly or
         indirectly, and including any obligation of such Person, direct or
         indirect, (i) to purchase or pay (or advance or supply funds for the
         purchase or payment of) such Debt or to purchase (or to advance or
         supply funds for the purchase of) any security for the payment of such
         Debt, (ii) to purchase property, securities or services for the purpose
         of assuring the owner of such Debt of the payment of such Debt, (iii)
         to maintain working capital, equity capital, available cash or other
         financial statement condition of the primary obligor so as to enable
         the primary obligor to pay such Debt, (iv) to provide equity capital
         under or in respect of equity subscription arrangements (to the extent
         that such obligation to provide equity capital does not otherwise
         constitute Debt), or (v) to perform, or arrange for the performance of,
         any non-monetary obligations or non-funded debt payment obligations of
         the primary obligor.

                  "TAX SHARING AGREEMENT" means the Amended and Restated
         Agreement for the Allocation of Income Tax Liabilities and Benefits,
         dated as of January 1, 1994, by and among the Borrower, each of the
         members of the Consolidated Group (as defined therein), and each of the
         corporations that become members of the Consolidated Group.

                  "TERMINATION DATE" means the earlier to occur of (i) June 26,
         2001 and (ii) the date of termination or reduction in whole of the
         Commitments pursuant to Section 2.03 or 9.02.


                                       17


   22

                  "THREE-MONTH SECONDARY CD RATE" means, for any day, the
         secondary market rate for three-month certificates of deposit reported
         as being in effect on such day (or, if such day is not a Business Day,
         the next preceding Business Day) by the Board through the public
         information telephone line of the Federal Reserve Bank of New York
         (which rate will, under the current practices of the Board, be
         published in the Federal Reserve Statistical Release H.15(519) during
         the week following such day) or, if such rate is not so reported on
         such day or such next preceding Business Day, the average of the
         secondary market quotations for three-month certificates of deposit of
         major money center banks in New York City received at approximately
         10:00 a.m. on such day (or, if such day is not a Business Day, on the
         next preceding Business Day) by the Administrative Agent from three
         negotiable certificate of deposit dealers of recognized standing
         selected by it.

                  "TRUSTEE" has the meaning assigned to that term in the
         Indenture.

                  "TYPE" has the meaning assigned to such term (i) in the
         definition of "Loan" when used in such context and (ii) in the
         definition of "Borrowing" when used in such context.

         SECTION 1.02. COMPUTATION OF TIME PERIODS; CONSTRUCTION.

     (a) Unless otherwise indicated, each reference in this Agreement to a
specific time of day is a reference to New York City time. In the computation of
periods of time under this Agreement, any period of a specified number of days
or months shall be computed by including the first day or month occurring during
such period and excluding the last such day or month. In the case of a period of
time "from" a specified date "to" or "until" a later specified date, the word
"from" means "from and including" and the words "to" and "until" each means "to
but excluding".

     (b) The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter forms. The words
"include", "includes", and "including" shall be deemed to be followed by the
phrase "without limitation". The word "will" shall be construed to have the same
meaning and effect as the word "shall". Unless the context requires otherwise
(i) any definition of or reference to any agreement, instrument or other
document herein shall be construed as referring to such agreement, instrument or
other document as from time to time amended, supplemented or otherwise modified
(subject to any restrictions on such amendments, supplements or modifications
set forth herein), (ii) any reference herein to any Person shall be construed to
include such Person's successors and assigns, (iii) the words "herein", "hereof"
and "hereunder", and words of similar import, shall be construed to refer to
this Agreement in its entirety and not to any particular provision hereof, (iv)
all references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (v) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.


                                       18
   23

         SECTION 1.03. ACCOUNTING TERMS. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles consistent with those applied in the preparation of the
financial statements referred to in Section 7.01(e) ("GAAP").

                                   ARTICLE II
                                   COMMITMENTS

         SECTION 2.01. THE COMMITMENTS. Each Lender severally agrees, on the
terms and conditions hereinafter set forth to make Loans to the Borrower and to
participate in the issuance of Letters of Credit (and the LC Outstandings
thereunder) during the period from the Closing Date until the Termination Date
in an aggregate outstanding amount not to exceed on any day such Lender's
Available Commitment (after giving effect to all Extensions of Credit to be made
on such day and the application of the proceeds thereof). Within the limits
hereinafter set forth, the Borrower may request Extensions of Credit hereunder,
prepay Loans or reduce or cancel Letters of Credit, and use the resulting
increase in the Available Commitments for further Extensions of Credit in
accordance with the terms hereof.

         SECTION 2.02. FEES.

         (a) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commitment fee on the average daily amount of such
Lender's Available Commitment at the rate of 0.375% per annum, from the Closing
Date, in the case of each Bank, and from the effective date specified in the
Lender Assignment pursuant to which it became a Lender, in the case of each
other Lender, until the Termination Date, payable quarterly in arrears on the
last day of each January, April, July and October, commencing the first such
date to occur following the date hereof, and on the Termination Date.

         (b) The Borrower agrees to pay to the Administrative Agent for the
account of each Lender a commission on the average daily aggregate amount of the
LC Outstandings from the Closing Date until the Termination Date at a rate per
annum equal to the Applicable Margin with respect to Eurodollar Rate Loans,
payable quarterly in arrears on the last day of each January, April, July and
October, commencing on the first such date to occur following the date hereof,
and on the Termination Date;

         (c) In addition to the fees provided for in subsections (a) and (b)
above, the Borrower shall pay to the Administrative Agent, for the account of
Chase, such other fees as are provided for in that certain letter agreement,
dated May 12, 2000, among the Borrower, the Arranger and Chase (the "FEE
LETTER"), in the amounts and at the times specified therein.

         SECTION 2.03. REDUCTION OF THE COMMITMENTS.

         (a) The Borrower may, upon at least three (3) Business Days' notice to
the Administrative Agent (which shall promptly distribute copies thereof to the
Lenders), terminate in whole or reduce ratably in part the unused portions of
the Commitments; provided that any such partial reduction shall be in the
aggregate amount of $10,000,000 or an integral multiple of $1,000,000 in excess
thereof.

                                       19
   24


         (b) On each date that the Borrower repurchases Senior Notes from any
Noteholder as the result of a Change in Control (as defined in the Indenture),
the Commitments of the Lenders shall automatically be ratably reduced by an
amount equal in the aggregate to the product of (i) the Commitments on such date
(whether used or unused) and (ii) the percentage obtained by dividing (A) the
aggregate principal amount of such Senior Notes being repurchased by (B) the
aggregate principal amount of the Senior Note Debt then outstanding.

         SECTION 2.04. COMPUTATIONS OF OUTSTANDINGS. Whenever reference is made
in this Agreement to the principal amount outstanding on any date under this
Agreement, such reference shall refer to the sum of (i) the aggregate principal
amount of all Loans outstanding on such date under this Agreement plus (ii) the
aggregate LC Outstandings of all Letters of Credit outstanding on such date, in
each case after giving effect to all Extensions of Credit to be made on such
date and the application of the proceeds thereof. At no time shall the principal
amount outstanding under this Agreement exceed the aggregate amount of the
Commitments hereunder. References to the unused portion of the Commitments under
this Agreement shall refer to the excess, if any, of the Commitments hereunder
over the principal amount outstanding hereunder; and references to the unused
portion of any Lender's Commitment under this Agreement shall refer to such
Lender's Percentage of the unused Commitments hereunder.

                                  ARTICLE III
                                      LOANS

         SECTION 3.01. LOANS.

         (a) The Borrower may request a Borrowing (other than a Conversion) by
delivering a notice (a "NOTICE OF BORROWING") to the Administrative Agent no
later than 12:00 noon on the third Business Day or, in the case of ABR Loans, on
the first Business Day, prior to the date of the proposed Borrowing. The
Administrative Agent shall give each Lender prompt notice of each Notice of
Borrowing. Each Notice of Borrowing shall be in substantially the form of
Exhibit A and shall specify the requested (i) date of such Borrowing, (ii) Type
of Loans to be made in connection with such Borrowing, (iii) Interest Period, if
any, for such Loans and (iv) amount of such Borrowing. Each proposed Borrowing
shall conform to the requirements of Sections 3.03 and 3.04.

         (b) Each Lender shall, before 12:00 noon on the date of such Borrowing,
make available for the account of its Applicable Lending Office to the
Administrative Agent at the Administrative Agent's offices at 1 Chase Manhattan
Plaza, 8th Floor, New York, New York, in same day funds, such Lender's
Percentage of such Borrowing. After the Administrative Agent's receipt of such
funds and upon fulfillment of the applicable conditions set forth in Article VI,
the Administrative Agent will make such funds available to the Borrower at the
Administrative Agent's aforesaid address; provided, however, that the proceeds
of the initial Extension of Credit shall be applied first directly by the
Administrative Agent on the Closing Date to the prepayment in full of all
outstanding principal, accrued interest and other amounts then owing under the
Existing Credit Agreement and then, to the extent the proceeds of such initial
Extension of Credit exceeds the amount necessary to prepay in full all
outstanding principal, accrued interest and other amounts then owing under the
Existing Credit Agreement, to the Borrower at the Administrative Agent's
aforesaid address for general corporate purposes. Notwithstanding the



                                       20
   25

foregoing, unless the Administrative Agent shall have received notice from a
Lender prior to the date of any Borrowing that such Lender will not make
available to the Administrative Agent such Lender's Percentage of such
Borrowing, the Administrative Agent may assume that such Lender has made such
Percentage available to the Administrative Agent on the date of such Borrowing
in accordance with the first sentence of this subsection (b), and the
Administrative Agent may, in reliance upon such assumption, make available to
the Borrower on such date a corresponding amount.

         (c) If and to the extent that any Lender (a "NON-PERFORMING LENDER")
shall not have made available to the Administrative Agent, in accordance with
subsection (b) above, such Lender's Percentage of any Borrowing, the
non-performing Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand corresponding amounts, together with
interest thereon for each day from the date such amount is made available to the
Borrower until the date such amount is repaid to the Administrative Agent, at
(i) in the case of the Borrower, the interest rate applicable at the time to
Loans made in connection with such Borrowing and (ii) in the case of such
Lender, the Federal Funds Effective Rate. Within the limits of each Lender's
Available Commitment and subject to the other terms and conditions set forth in
this Agreement for the making of Loans (including Section 8.01(h)), the Borrower
may request (and the Lenders shall honor) one or more additional Borrowings from
the performing Lenders to fund such repayment to the Administrative Agent. If a
non-performing Lender shall repay to the Administrative Agent such corresponding
amount in full (with interest as above provided), (x) the Administrative Agent
shall apply such corresponding amount and interest to the repayment to the
Administrative Agent (or repayment of Loans made to fund such repayment to the
Administrative Agent), and shall make any remainder available to the Borrower
and (y) such amount so repaid shall be deemed to constitute such Lender's Loan,
made as part of such Borrowing for purposes of this Agreement as if funded
concurrently with the other Loans made as part of such Borrowing, and such
Lender shall forthwith cease to be deemed a non-performing Lender; if and so
long as such non-performing Lender shall not repay such amount, and unless and
until an Eligible Assignee shall have assumed and performed the obligations of
such non-performing Lender, all computations by the Administrative Agent of
Percentages, Commitments and payments hereunder shall be made without regard to
the Commitment, or outstanding Loans, of such non-performing Lender, and any
amounts paid to the Administrative Agent for the account of such non-performing
Lender shall be held by the Administrative Agent in trust for such
non-performing Lender in a non-interest-bearing special purpose account. Nothing
herein shall in any way limit, waive or otherwise reduce any claims that any
party hereto may have against any non-performing Lender. The failure of any
Lender to make the Loan to be made by it as part of any Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its Loan
on the date of such Borrowing, but no Lender shall be responsible for the
failure of any other Lender to make the Loan to be made by such other Lender on
the date of any Borrowing.

         (d) Any Lender may request that Loans made by it be evidenced by a
Promissory Note. In such event, the Borrower shall prepare, execute and deliver
to such Lender a Promissory Note payable to the order of such Lender (or, if
requested by such Lender, to such Lender and its registered assigns) and in a
form approved by the Administrative Agent. Thereafter, the Loans evidenced by
such Promissory Note and interest thereon shall at all times (including after
assignment pursuant to Section 11.07) be represented by one or more Promissory




                                       21
   26

Notes in such form payable to the order of the payee named therein (or, if such
Promissory Note is a registered note, to such payee and its registered assigns).

         SECTION 3.02. CONVERSION OF LOANS. The Borrower may from time to time
Convert any Loan (or portion thereof) of any Type to one or more Loans of the
same or any other Type by delivering a notice of such Conversion (a "NOTICE OF
CONVERSION") to the Administrative Agent no later than 12:00 noon on (x) the
third Business Day prior to the date of any proposed Conversion into a
Eurodollar Rate Loan and (y) the first Business Day prior to the date of any
proposed Conversion into an ABR Loan. The Administrative Agent shall give each
Lender prompt notice of each Notice of Conversion. Each Notice of Conversion
shall be in substantially the form of Exhibit B and shall specify (i) the
requested date of such Conversion, (ii) the Type of, and Interest Period, if
any, applicable to, the Loans (or portions thereof) proposed to be Converted,
(iii) the requested Type of Loans to which such Loans (or portions thereof) are
proposed to be Converted, (iv) the requested initial Interest Period, if any, to
be applicable to the Loans resulting from such Conversion and (v) the aggregate
amount of Loans (or portions thereof) proposed to be Converted. Each proposed
Conversion shall be subject to the provisions of Sections 3.03 and 3.04.

         SECTION 3.03. INTEREST PERIODS. The period between the date of each
Eurodollar Rate Loan and the date of payment in full of such Loan shall be
divided into successive periods of months ("INTEREST PERIODS") for purposes of
computing interest applicable thereto. The initial Interest Period for each such
Loan shall begin on the day such Loan is made, and each subsequent Interest
Period shall begin on the last day of the immediately preceding Interest Period
for such Loan. The duration of each Interest Period shall be 1, 2, 3, or 6
months, as the Borrower may, in accordance with Section 3.01 or 3.02, select;
provided, however, that:

              (i) the Borrower may not select any Interest Period for a
         Eurodollar Rate Loan that ends after the Termination Date;

              (ii) whenever the last day of any Interest Period would otherwise
         occur on a day other than a Business Day, the last day of such Interest
         Period shall occur on the next succeeding Business Day, provided that
         if such extension would cause the last day of such Interest Period to
         occur in the next following calendar month, the last day of such
         Interest Period shall occur on the next preceding Business Day; and

              (iii) any Interest Period that commences on the last Business Day
         of a calendar month (or on a day for which there is no numerically
         corresponding day in the last calendar month of such Interest Period)
         shall end on the last Business Day of the last calendar month of such
         Interest Period.

         SECTION 3.04. OTHER TERMS RELATING TO THE MAKING AND CONVERSION OF
LOANS.

         (a) Notwithstanding anything in Section 3.01 or 3.02 to the contrary:

              (i) each Borrowing (other than a Borrowing deemed made under
         Section 4.04(d)) shall be in an aggregate amount not less than
         $10,000,000, or an integral multiple of $1,000,000 in excess thereof
         (or such lesser amount as shall be equal to the total amount of the
         Available Commitments on such date, after giving effect to all other


                                       22
   27

         Extensions of Credit to be made on such date), and shall consist of
         Loans of the same Type, having the same Interest Period and made or
         Converted on the same day by the Lenders ratably according to their
         respective Percentages; provided, however, that the initial Borrowing
         shall be in an aggregate amount sufficient to repay in full all
         outstanding principal, accrued interest and other amounts owing under
         the Existing Credit Agreement as of the Closing Date;

              (ii) the Borrower may request that more than one Borrowing be made
         on the same day;

              (iii) at no time shall more than fifteen (15) different Borrowings
         comprising Eurodollar Rate Loans be outstanding hereunder;

              (iv) no Eurodollar Rate Loan may be Converted on a date other than
         the last day of the Interest Period applicable to such Loan unless the
         corresponding amounts, if any, payable to the Lenders pursuant to
         Section 5.04(b) are paid contemporaneously with such Conversion;

              (v) if the Borrower shall either fail to give a timely Notice of
         Conversion pursuant to Section 3.02 in respect of any Loans or fail, in
         any Notice of Conversion that has been timely given, to select the
         duration of any Interest Period for Loans to be Converted into
         Eurodollar Rate Loans in accordance with Section 3.03, such Loans
         shall, on the last day of the then existing Interest Period therefor,
         automatically Convert into, or remain as, as the case may be, ABR
         Loans; and

              (vi) if, on the date of any proposed Conversion, any Event of
         Default or Default shall have occurred and be continuing, all Loans
         then outstanding shall, on such date, automatically Convert into, or
         remain as, as the case may be, ABR Loans; provided, however, that with
         respect to any Default that occurs and is continuing as a result of the
         failure of the Borrower to comply with the ratio set forth in Section
         8.01(j), any such Loans may be Converted into Eurodollar Rate Loans
         with an Interest Period not to exceed three months in duration.

         (b) If any Lender shall notify the Administrative Agent that the
introduction of or any change in or in the interpretation of any law or
regulation makes it unlawful, or that any central bank or other governmental
authority asserts that it is unlawful, for such Lender or its Applicable Lending
Office to perform its obligations hereunder to make, or to fund or maintain,
Eurodollar Rate Loans hereunder, (i) the obligation of such Lender to make, or
to Convert Loans into, Eurodollar Rate Loans for such Borrowing or any
subsequent Borrowing from such Lender shall be forthwith suspended until the
earlier to occur of the date upon which (A) such Lender shall cease to be a
party hereto and (B) it is no longer unlawful for such Lender to make, fund or
maintain Eurodollar Rate Loans, and (ii) if the maintenance of Eurodollar Rate
Loans then outstanding through the last day of the Interest Period therefor
would cause such Lender to be in violation of such law, regulation or assertion,
the Borrower shall either prepay or Convert all Eurodollar Rate Loans from such
Lender within five days after such notice. Promptly upon becoming aware that the
circumstances that caused such Lender to deliver such notice no longer exist,
such Lender shall deliver notice thereof to the Administrative Agent (but the
failure to do




                                       23
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so shall impose no liability upon such Lender). Promptly upon receipt of such
notice from such Lender (or upon such Lender's assigning all of its Commitment,
Loans, participation and other rights and obligations hereunder to an Eligible
Assignee), the Administrative Agent shall deliver notice thereof to the Borrower
and the Lenders and such suspension shall terminate.

         (c) If the Required Lenders shall, at least one Business Day before the
date of any requested Borrowing, notify the Administrative Agent that the
Adjusted LIBO Rate for Eurodollar Rate Loans to be made in connection with such
Borrowing will not adequately reflect the cost to such Required Lenders of
making, funding or maintaining their respective Eurodollar Rate Loans for such
Borrowing, or that they are unable to acquire funding in a reasonable manner so
as to make available Eurodollar Rate Loans in the amount and for the Interest
Period requested, or if the Administrative Agent shall determine that adequate
and reasonable means do not exist to be able to determine the Adjusted LIBO
Rate, then the right of the Borrower to select Eurodollar Rate Loans for such
Borrowing and any subsequent Borrowing shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist, and each Loan to be made
or Converted in connection with such Borrowing shall be an ABR Loan.

         (d) If any Lender shall have delivered a notice to the Administrative
Agent described in Section 3.04(b), or shall become a non-performing Lender
under Section 3.01(c) or Section 4.04(c), and if and so long as such Lender
shall not have withdrawn such notice or corrected such non-performance in
accordance with said Section 3.04(b), Section 3.01(c) or Section 4.04(c), the
Borrower or the Administrative Agent may demand that such Lender assign in
accordance with Section 11.07, to one or more Eligible Assignees designated by
the Borrower or the Administrative Agent, all (but not less than all) of such
Lender's Commitment, Loans, participation and other rights and obligations
hereunder; provided that any such demand by the Borrower during the continuance
of an Event of Default or Default shall be ineffective without the consent of
the Required Lenders. If, within 30 days following any such demand by the
Administrative Agent or the Borrower, any such Eligible Assignee so designated
shall fail to consummate such assignment on terms reasonably satisfactory to
such Lender, or the Borrower and the Administrative Agent shall have failed to
designate any such Eligible Assignee, then such demand by the Borrower or the
Administrative Agent shall become ineffective, it being understood for purposes
of this provision that such assignment shall be conclusively deemed to be on
terms reasonably satisfactory to such Lender, and such Lender shall be compelled
to consummate such assignment forthwith, if such Eligible Assignee (i) shall
agree to such assignment in substantially the form of the Lender Assignment
attached hereto as Exhibit G and (ii) shall tender payment to such Lender in an
amount equal to the full outstanding dollar amount accrued in favor of such
Lender hereunder (as computed in accordance with the records of the
Administrative Agent), including, without limitation, all accrued interest and
fees and, to the extent not paid by the Borrower, any payments required pursuant
to Section 5.04(b).

         (e) Each Notice of Borrowing and Notice of Conversion shall be
irrevocable and binding on the Borrower. In the case of any Borrowing which the
related Notice of Borrowing or Notice of Conversion specifies is to be comprised
of Eurodollar Rate Loans, the Borrower shall indemnify each Lender against any
loss, cost or expense incurred by such Lender as a result of any failure to
fulfill, on or before the date specified in such Notice of Borrowing or Notice
of Conversion for such Borrowing, the applicable conditions (if any) set forth
in this Article III



                                       24
   29

(other than failure pursuant to the provisions of Section 3.04(b) or (c) hereof)
or in Article VI, including any such loss (including loss of anticipated
profits), cost or expense incurred by reason of the liquidation or reemployment
of deposits or other funds acquired by such Lender to fund the Loan to be made
by such Lender when such Loan, as a result of such failure, is not made on such
date.

         SECTION 3.05. REPAYMENT OF LOANS; INTEREST

         (a) Principal. The Borrower shall repay the outstanding principal
amount of the Loans on the Termination Date.

         (b) Interest. The Borrower shall pay interest on the unpaid principal
amount of each Loan owing to each Lender from the date of such Loan until such
principal amount shall be paid in full, at the Applicable Rate for such Loan
(except as otherwise provided in this subsection (b)), payable as follows:

              (i) ABR Loans. If such Loan is an ABR Loan, interest thereon shall
         be payable quarterly in arrears on the last day of each January, April,
         July and October, on the date of any Conversion of such ABR Loan and on
         the date such ABR Loan shall become due and payable or shall otherwise
         be paid in full; provided that any amount of principal that is not paid
         when due (whether at stated maturity, by acceleration or otherwise)
         shall bear interest, from the date on which such amount is due until
         such amount is paid in full, payable on demand, at a rate per annum
         equal at all times to the Default Rate.

              (ii) Eurodollar Rate Loans. If such Loan is a Eurodollar Rate
         Loan, interest thereon shall be payable on the last day of such
         Interest Period and, if the Interest Period for such Loan has a
         duration of more than three months, on that day of each third month
         during such Interest Period that corresponds to the first day of such
         Interest Period (or, if any such month does not have a corresponding
         day, then on the last day of such month); provided that any amount of
         principal that is not paid when due (whether at stated maturity, by
         acceleration or otherwise) shall bear interest, from the date on which
         such amount is due until such amount is paid in full, payable on
         demand, at a rate per annum equal at all times to the Default Rate.

                                   ARTICLE IV
                                LETTERS OF CREDIT

         SECTION 4.01. ISSUING BANKS. Subject to the terms and conditions
hereof, the Borrower may from time to time identify and arrange for one or more
Lenders to act as Issuing Banks hereunder. Any such designation by the Borrower
shall be notified to the Administrative Agent at least five Business Days prior
to the first date upon which the Borrower proposes that such Issuing Bank issue
its first Letter of Credit. Nothing contained herein shall be deemed to require
any Lender to agree to act as an Issuing Bank, if it does not so desire.



                                       25
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         SECTION 4.02. LETTERS OF CREDIT.

         (a) Each Letter of Credit shall be issued (or the stated maturity
thereof extended or terms thereof modified or amended) on not less than three
Business Days' prior written notice thereof to the Administrative Agent (which
shall promptly distribute copies thereof to the Lenders) and the relevant
Issuing Bank. Each such notice (a "REQUEST FOR ISSUANCE") shall specify (i) the
date (which shall be a Business Day) of issuance of such Letter of Credit (or
the date of effectiveness of such extension, modification or amendment) and the
stated expiry date thereof (which shall be no later than the date that is five
Business Days prior to the Termination Date, subject to the other terms and
conditions contained herein (including the satisfaction of the conditions
precedent set forth in Section 6.02)), (ii) the proposed stated amount of such
Letter of Credit (which shall not be less than $500,000) and (iii) such other
information as shall demonstrate compliance of such Letter of Credit with the
requirements specified therefor in this Agreement and the relevant Issuing Bank
Agreement. Each Request for Issuance shall be irrevocable unless modified or
rescinded by the Borrower not less than two days prior to the proposed date of
issuance (or effectiveness) specified therein. Not later than 12:00 noon on the
proposed date of issuance (or effectiveness) specified in such Request for
Issuance, and upon fulfillment of the applicable conditions precedent and the
other requirements set forth herein and in the relevant Issuing Bank Agreement,
such Issuing Bank shall issue (or extend, amend or modify) such Letter of Credit
and provide notice and a copy thereof to the Administrative Agent, which shall
promptly furnish copies thereof to the Lenders.

         (b) Each Lender severally agrees with such Issuing Bank to participate
in the Extension of Credit resulting from the issuance (or extension,
modification or amendment) of such Letter of Credit, in the manner and the
amount provided in Section 4.04(b), and the issuance of such Letter of Credit
shall be deemed to be a confirmation by such Issuing Bank and each Lender of
such participation in such amount.

         (c) Notwithstanding anything herein to the contrary, the aggregate
stated amount of all Letters of Credit outstanding at any one time shall not
exceed $200,000,000.

         SECTION 4.03. ISSUING BANK FEES. The Borrower shall pay directly to
each Issuing Bank such fees and expenses, if any, specified to be paid to such
Issuing Bank pursuant to the Issuing Bank Agreement to which it is a party, at
the times, and in the manner, specified in such Issuing Bank Agreement.

         SECTION 4.04. REIMBURSEMENT TO ISSUING BANKS.

         (a) The Borrower hereby agrees to pay to the Administrative Agent for
the account of each Issuing Bank, on demand made by such Issuing Bank to the
Borrower and the Administrative Agent, on and after each date on which such
Issuing Bank shall pay any amount under the Letter of Credit issued by such
Issuing Bank, a sum equal to the amount so paid plus interest on such amount
from the date so paid by such Issuing Bank until repayment to such Issuing Bank
in full at a fluctuating interest rate per annum equal at all times to the
Applicable Rate for ABR Loans.



                                       26
   31

         (b) If any Issuing Bank shall not have been reimbursed in full for any
payment made by such Issuing Bank under the Letter of Credit issued by such
Issuing Bank on the date of such payment, such Issuing Bank shall give the
Administrative Agent and each Lender prompt notice thereof (an "LC PAYMENT
NOTICE") no later than 12:00 noon on the Business Day immediately succeeding the
date of such payment by such Issuing Bank. Each Lender severally agrees to
purchase from each Issuing Bank a participation in the reimbursement obligation
of the Borrower to such Issuing Bank under subsection (a) above, by paying to
the Administrative Agent for the account of such Issuing Bank an amount equal to
such Lender's Percentage of such unreimbursed amount paid by such Issuing Bank,
plus interest on such amount at a rate per annum equal to the Federal Funds
Effective Rate from the date of such payment by such Issuing Bank to the date of
payment to such Issuing Bank by such Lender. Each such payment by a Lender shall
be made not later than 3:00 P.M. on the later to occur of (i) the Business Day
immediately following the date of such payment by such Issuing Bank and (ii) the
Business Day on which such Lender shall have received an LC Payment Notice from
such Issuing Bank. Each Lender's obligation to make each such payment to the
Administrative Agent for the account of such Issuing Bank shall be several and
shall not be affected by the occurrence or continuance of any Default or Event
of Default or the failure of any other Lender to make any payment under this
Section 4.04. Each Lender further agrees that each such payment shall be made
without any offset, abatement, withholding or reduction whatsoever.

         (c) The failure of any Lender to make any payment to the Administrative
Agent for the account of an Issuing Bank in accordance with subsection (b)
above, shall not relieve any other Lender of its obligation to make payment, but
no Lender shall be responsible for the failure of any other Lender. If any
Lender (a "NON-PERFORMING LENDER") shall fail to make any payment to the
Administrative Agent for the account of an Issuing Bank in accordance with
subsection (b) above, within five Business Days after the LC Payment Notice
relating thereto, then, for so long as such failure shall continue, such Issuing
Bank shall be deemed, for purposes of Section 5.05 and Article IX hereof and the
Cash Collateral Agreement, to be a Lender hereunder owed a Loan in an amount
equal to the outstanding principal amount due and payable by such Lender to the
Administrative Agent for the account of such Issuing Bank pursuant to subsection
(b) above.

         (d) Each participation purchased by a Lender under subsection (b)
above, shall constitute an ABR Loan deemed made by such Lender to the Borrower
on the date of such payment by the relevant Issuing Bank under the Letter of
Credit issued by such Issuing Bank (irrespective of the Borrower's
noncompliance, if any, with the conditions precedent for Loans hereunder); and
all such payments by the Lenders in respect of any one such payment by such
Issuing Bank shall constitute a single Borrowing hereunder.

         SECTION 4.05. OBLIGATIONS ABSOLUTE. The payment obligations of each
Lender under Section 4.04(b) and of the Borrower under this Agreement in respect
of any payment under any Letter of Credit and any Loan made under Section
4.04(d) shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement under all circumstances, including
the following circumstances:

              (i) any lack of validity or enforceability of any Loan Document or
         any other agreement or instrument relating thereto or to such Letter of
         Credit;



                                       27
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              (ii) any amendment or waiver of, or any consent to departure from,
         all or any of the Loan Documents;

              (iii) the existence of any claim, set-off, defense or other right
         which the Borrower may have at any time against any beneficiary, or any
         transferee, of such Letter of Credit (or any Persons for whom any such
         beneficiary or any such transferee may be acting), any Issuing Bank, or
         any other Person, whether in connection with this Agreement, the
         transactions contemplated herein or by such Letter of Credit, or any
         unrelated transaction;

              (iv) any statement or any other document presented under such
         Letter of Credit proving to be forged, fraudulent, invalid or
         insufficient in any respect or any statement therein being untrue or
         inaccurate in any respect;

              (v) payment in good faith by any Issuing Bank under the Letter of
         Credit issued by such Issuing Bank against presentation of a draft or
         certificate which does not comply with the terms of such Letter of
         Credit; or

              (vi) any other circumstance or happening whatsoever, whether or
         not similar to any of the foregoing.

              SECTION 4.06. LIABILITY OF ISSUING BANKS AND THE LENDERS. The
         Borrower assumes all risks of the acts and omissions of any beneficiary
         or transferee of any Letter of Credit. Neither the Issuing Bank that
         has issued such Letter of Credit, the Lenders nor any of their
         respective officers, directors, employees, agents or Affiliates shall
         be liable or responsible for (a) the use that may be made of such
         Letter of Credit or any acts or omissions of any beneficiary or
         transferee thereof in connection therewith; (b) the validity,
         sufficiency or genuineness of documents, or of any endorsement thereon,
         even if such documents should prove to be in any or all respects
         invalid, insufficient, fraudulent or forged; (c) payment by such
         Issuing Bank against presentation of documents that do not comply with
         the terms of such Letter of Credit, including failure of any documents
         to bear any reference or adequate reference to such Letter of Credit;
         or (d) any other circumstances whatsoever in making or failing to make
         payment under such Letter of Credit, except that the Borrower shall
         have the right to bring suit against such Issuing Bank, and such
         Issuing Bank shall be liable to the Borrower and any Lender, to the
         extent of any direct, as opposed to consequential, damages suffered by
         the Borrower or such Lender which the Borrower or such Lender proves
         were caused by such Issuing Bank's willful misconduct or gross
         negligence, including such Issuing Bank's willful failure to make
         timely payment under such Letter of Credit following the presentation
         to it by the beneficiary thereof of a draft and accompanying
         certificate(s) which strictly comply with the terms and conditions of
         such Letter of Credit. In furtherance and not in limitation of the
         foregoing, any Issuing Bank may accept sight drafts and accompanying
         certificates presented under the Letter of Credit issued by such
         Issuing Bank that appear on their face to be in order, without
         responsibility for further investigation, regardless of any notice or
         information to the contrary. Notwithstanding the foregoing, no Lender
         shall be obligated to indemnify the Borrower for damages caused by any
         Issuing Bank's willful misconduct or gross negligence, and the
         obligation of the Borrower to reimburse the Lenders hereunder shall be
         absolute and unconditional, notwithstanding the gross negligence or
         willful misconduct of any Issuing Bank.



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                                   ARTICLE V
                           PAYMENTS, COMPUTATIONS AND
                                YIELD PROTECTION

         SECTION 5.01. PAYMENTS AND COMPUTATIONS.

         (a) The Borrower shall make each payment hereunder and under the other
Loan Documents not later than 2:00 P.M. on the day when due in Dollars to the
Administrative Agent at its offices at 1 Chase Manhattan Plaza, 8th Floor, New
York, New York, in same day funds, except payments to be made directly to any
Issuing Bank as expressly provided herein; any payment received after 3:00 P.M.
shall be deemed to have been received at the start of business on the next
succeeding Business Day, unless the Administrative Agent shall have received
from, or on behalf of, the Borrower a Federal Reserve reference number with
respect to such payment before 4:00 P.M. The Administrative Agent will promptly
thereafter cause to be distributed like funds relating to the payment of
principal, interest, fees or other amounts payable to the Lenders, to the
respective Lenders to which the same are payable, for the account of their
respective Applicable Lending Offices, in each case to be applied in accordance
with the terms of this Agreement. If and to the extent that any distribution of
any payment from the Borrower required to be made to any Lender pursuant to the
preceding sentence shall not be made in full by the Administrative Agent on the
date such payment was received by the Administrative Agent, the Administrative
Agent shall pay to such Lender, upon demand, interest on the unpaid amount of
such distribution, at a rate per annum equal to the Federal Funds Effective
Rate, from the date of such payment by the Borrower to the Administrative Agent
to the date of payment in full by the Administrative Agent to such Lender of
such unpaid amount. Upon the Administrative Agent's acceptance of a Lender
Assignment and recording of the information contained therein in the Register
pursuant to Section 11.07, from and after the effective date specified in such
Lender Assignment, the Administrative Agent shall make all payments hereunder
and under any Promissory Notes in respect of the interest assigned thereby to
the Lender assignee thereunder, and the parties to such Lender Assignment shall
make all appropriate adjustments in such payments for periods prior to such
effective date directly between themselves.

         (b) The Borrower hereby authorizes the Administrative Agent, each
Lender and each Issuing Bank, if and to the extent payment owed to the
Administrative Agent, such Lender or such Issuing Bank, as the case may be, is
not made when due hereunder (or, in the case of a Lender, under any Promissory
Note held by such Lender), to charge from time to time against any or all of the
Borrower's accounts with the Administrative Agent, such Lender or such Issuing
Bank, as the case may be, any amount so due.

         (c) All computations of interest based on the Alternate Base Rate (when
the Alternate Base Rate is based on the Prime Rate) shall be made by the
Administrative Agent on the basis of a year of 365 or 366 days, as the case may
be. All other computations of interest and fees hereunder (including
computations of interest based on the Adjusted LIBO Rate, the Base CD Rate and
the Federal Funds Effective Rate) shall be made by the Administrative Agent on
the basis of a year of 360 days. In each such case, such computation shall be
made for the actual number of days (including the first day but excluding the
last day) occurring in the period for which such interest or fees are payable.
Each such determination by the Administrative Agent or a Lender shall be
conclusive and binding for all purposes, absent manifest error.



                                       29
   34

         (d) Whenever any payment hereunder or under any other Loan Document
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest and fees
hereunder; provided, however, that if such extension would cause payment of
interest on or principal of Eurodollar Rate Loans to be made in the next
following calendar month, such payment shall be made on the next preceding
Business Day and such reduction of time shall in such case be included in the
computation of payment of interest hereunder.

         (e) Unless the Administrative Agent shall have received notice from the
Borrower prior to the date on which any payment is due to the Lenders hereunder
that the Borrower will not make such payment in full, the Administrative Agent
may assume that the Borrower has made such payment in full to the Administrative
Agent on such date, and the Administrative Agent may, in reliance upon such
assumption, cause to be distributed to each Lender on such due date an amount
equal to the amount then due such Lender. If and to the extent the Borrower
shall not have so made such payment in full to the Administrative Agent, such
Lender shall repay to the Administrative Agent forthwith on demand such amount
distributed to such Lender, together with interest thereon, for each day from
the date such amount is distributed to such Lender until the date such Lender
repays such amount to the Administrative Agent, at the Federal Funds Effective
Rate.

         (f) Any amount payable by the Borrower hereunder or under any of the
Promissory Notes that is not paid when due (whether at stated maturity, by
acceleration or otherwise) shall (to the fullest extent permitted by law) bear
interest, from the date when due until paid in full, at a rate per annum equal
at all times to the Default Rate, payable on demand.

         (g) If at any time insufficient funds are received by and available to
the Administrative Agent to pay fully all amounts of principal, interest and
fees then due hereunder, such funds shall be applied (i) first, towards payment
of interest and fees then due hereunder, ratably among the parties entitled
thereto in accordance with the amounts of interest and fees then due to such
parties, and (ii) second, towards payment of principal then due hereunder,
ratably among the parties entitled thereto.

         SECTION 5.02. INTEREST RATE DETERMINATION.

         (a) The Administrative Agent shall give prompt notice to the Borrower
and the Lenders of the applicable interest rate determined by the Administrative
Agent for purposes of Section 3.05(b)(i) or (ii).

         SECTION 5.03. PREPAYMENTS.

         The Borrower shall have no right to prepay any principal amount of any
Loans other than as provided in subsections (a) and (b) below.

         (a) The Borrower may, upon at least three (3) Business Days' notice to
the Administrative Agent stating the proposed date and the aggregate principal
amount of the prepayment, and if such notice is given, the Borrower shall,
prepay the outstanding principal amounts of Loans made as part of the same
Borrowing, in whole or ratably in part, together with (i) accrued interest to
the date of such prepayment on the principal amount prepaid and (ii) in the



                                       30
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case of Eurodollar Rate Loans, any amount payable to the Lenders pursuant to
Section 5.04(b); provided, however, that each partial prepayment shall be in an
aggregate principal amount of not less than $10,000,000 or an integral multiple
of $1,000,000 in excess thereof.

         (b) On the date of any termination or optional or mandatory reduction
of the Commitments pursuant to Section 2.03, the Borrower shall pay or prepay so
much of the principal amount outstanding as shall be necessary in order that the
aggregate principal amount outstanding (after giving effect to all Extensions of
Credit to be made on such date and the application of the proceeds thereof) will
not exceed the Commitments following such termination or reduction, together
with (i) accrued interest to the date of such prepayment on the principal amount
repaid and (ii) in the case of prepayments of Eurodollar Rate Loans, any amount
payable to the Lenders pursuant to Section 5.04(b). Any prepayments required by
this subsection (b) shall be applied to outstanding ABR Loans up to the full
amount thereof before they are applied, first, to outstanding Eurodollar Rate
Loans and, second, as cash collateral, pursuant to the Cash Collateral
Agreement, to secure LC Outstandings.

         SECTION 5.04. YIELD PROTECTION.

         (a) Increased Costs. If, due to either (i) the introduction of or any
change in or in the interpretation of any law or regulation after the date
hereof, or (ii) the compliance with any guideline or request from any central
bank or other governmental authority (whether or not having the force of law)
issued or made after the date hereof, there shall be reasonably incurred any
increase in (A) the cost to any Lender of agreeing to make or making, funding or
maintaining Eurodollar Rate Loans, or of participating in the issuance,
maintenance or funding of any Letter of Credit, or (B) the cost to any Issuing
Bank of issuing or maintaining any Letter of Credit, then the Borrower shall
from time to time, upon demand by such Lender or Issuing Bank, as the case may
be (with a copy of such demand to the Administrative Agent), pay to the
Administrative Agent for the account of such Lender or Issuing Bank, as the case
may be, additional amounts sufficient to compensate such Lender or Issuing Bank,
as the case may be, for such increased cost. A certificate as to the amount of
such increased cost and giving a reasonable explanation thereof, submitted to
the Borrower and the Administrative Agent by such Lender or such Issuing Bank,
as the case may be, shall constitute such demand and shall be conclusive and
binding for all purposes, absent manifest error.

         (b) Breakage. If, due to any prepayment pursuant to Section 5.03, an
acceleration of maturity of the Loans pursuant to Section 9.02, or any other
reason, any Lender receives payments of principal of any Eurodollar Rate Loan
other than on the last day of the Interest Period relating to such Loan, or if
the Borrower shall Convert any Eurodollar Rate Loans on any day other than the
last day of the Interest Period therefor, or if the Borrower shall fail to
prepay a Eurodollar Rate Loan on the date specified in a notice of prepayment,
the Borrower shall, promptly after demand by such Lender (with a copy of such
demand to the Administrative Agent), pay to the Administrative Agent for the
account of such Lender any amounts required to compensate such Lender for
additional



                                       31
   36

losses, costs, or expenses (including anticipated lost profits) that such Lender
may reasonably incur as a result of such payment, Conversion or failure to
prepay, including any loss, cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to fund or maintain such Loan. For purposes of this subsection (b), a
certificate setting forth the amount of such additional losses, costs, or
expenses and giving a reasonable explanation thereof, submitted to the Borrower
and the Administrative Agent by such Lender, shall constitute such demand and
shall be conclusive and binding for all purposes, absent manifest error.

         (c) Capital. If any Lender or Issuing Bank determines that (i)
compliance with any law or regulation or any guideline or request from any
central bank or other governmental authority (whether or not having the force of
law) affects or would affect the amount of capital required or expected to be
maintained by such Lender or Issuing Bank, whether directly, or indirectly as a
result of commitments of any corporation controlling such Lender or Issuing Bank
(but without duplication), and (ii) the amount of such capital is increased by
or based upon (A) the existence of such Lender's or Issuing Bank's commitment to
lend or issue or participate in any Letter of Credit hereunder, or (B) the
participation in or issuance or maintenance of any Letter of Credit or Loan and
(C) other similar such commitments, then, upon demand by such Lender or Issuing
Bank, the Borrower shall immediately pay to the Administrative Agent for the
account of such Lender or Issuing Bank from time to time as specified by such
Lender or Issuing Bank additional amounts sufficient to compensate such Lender
or Issuing Bank in the light of such circumstances, to the extent that such
Lender or Issuing Bank reasonably determines such increase in capital to be
allocable to the transactions contemplated hereby. A certificate as to such
amounts and giving a reasonable explanation thereof (to the extent permitted by
law), submitted to the Borrower and the Administrative Agent by such Lender or
Issuing Bank, shall be conclusive and binding for all purposes, absent manifest
error.

         (d) Notices. Each Lender hereby agrees to use its best efforts to
notify the Borrower of the occurrence of any event referred to in subsection
(a), (b) or (c) of this Section 5.04 promptly after becoming aware of the
occurrence thereof. The failure of any Lender to provide such notice or to make
demand for payment under said subsection shall not constitute a waiver of such
Lender's rights hereunder; provided that, notwithstanding any provision to the
contrary contained in this Section 5.04, the Borrower shall not be required to
reimburse any Lender for any amounts or costs incurred under subsection (a), (b)
or (c) above, more than 90 days prior to the date that such Lender notifies the
Borrower in writing thereof, in each case unless, and to the extent that, any
such amounts or costs so incurred shall relate to the retroactive application of
any event notified to the Borrower which entitles such Lender to such
compensation. If any Lender shall subsequently determine that any amount
demanded and collected under this Section 5.04 was done so in error, such Lender
will promptly return such amount to the Borrower.

         (e) Survival of Obligations. Subject to subsection (d) above, the
Borrower's obligations under this Section 5.04 shall survive the repayment of
all other amounts owing to the Lenders, the Agents and the Issuing Banks under
the Loan Documents and the termination of the Commitments. If and to the extent
that the obligations of the Borrower under this Section 5.04 are unenforceable
for any reason, the Borrower agrees to make the maximum contribution to the
payment and satisfaction thereof which is permissible under applicable law.

         SECTION 5.05. SHARING OF PAYMENTS, ETC. If any Lender shall obtain any
payment (whether voluntary, involuntary, through the exercise of any right of
set-off, or otherwise) on account of the Loans owing to it (other than pursuant
to Section 5.04) in excess of its ratable share of payments obtained by all the
Lenders on account of the Loans of such Lenders, such Lender shall forthwith
purchase from the other Lenders such participation in the Loans owing to



                                       32
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them as shall be necessary to cause such purchasing Lender to share the excess
payment ratably with each of them; provided, however, that if all or any portion
of such excess payment is thereafter recovered from such purchasing Lender, such
purchase from each Lender shall be rescinded and such Lender shall repay to the
purchasing Lender the purchase price to the extent of such recovery together
with an amount equal to such Lender's ratable share (according to the proportion
of (i) the amount of such Lender's required repayment to (ii) the total amount
so recovered from the purchasing Lender) of any interest or other amount paid or
payable by the purchasing Lender in respect of the total amount so recovered.
The Borrower agrees that any Lender so purchasing a participation from another
Lender pursuant to this Section 5.05 may, to the fullest extent permitted by
law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender were the direct
creditor of the Borrower in the amount of such participation. Notwithstanding
the foregoing, if any Lender shall obtain any such excess payment involuntarily,
such Lender may, in lieu of purchasing participations from the other Lenders in
accordance with this Section 5.05, on the date of receipt of such excess
payment, return such excess payment to the Administrative Agent for distribution
in accordance with Section 5.01(a).

         SECTION 5.06. TAXES.

         (a) All payments by the Borrower hereunder and under the other Loan
Documents shall be made in accordance with Section 5.01, free and clear of and
without deduction for all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding, in
the case of each Lender, each Issuing Bank and each Agent, taxes imposed on its
overall net income, and franchise taxes imposed on it by the jurisdiction under
the laws of which such Lender, Issuing Bank or Agent (as the case may be) is
organized or any political subdivision thereof and, in the case of each Lender,
taxes imposed on its overall net income, and franchise taxes imposed on it by
the jurisdiction of such Lender's Applicable Lending Office or any political
subdivision thereof (all such non-excluded taxes, levies, imposts, deductions,
charges, withholdings and liabilities being hereinafter referred to as "TAXES").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any other Loan Document to any Lender,
Issuing Bank or Agent, (i) the sum payable shall be increased as may be
necessary so that after making all required deductions (including deductions
applicable to additional sums payable under this Section 5.06) such Lender,
Issuing Bank or Agent (as the case may be) receives an amount equal to the sum
it would have received had no such deductions been made, (ii) the Borrower shall
make such deductions and (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in accordance with
applicable law.

         (b) In addition, the Borrower agrees to pay any present or future stamp
or documentary taxes or any other excise or property taxes, charges or similar
levies that arise from any payment made hereunder or under any other Loan
Document or from the execution, delivery or registration of, or otherwise with
respect to, this Agreement or any other Loan Document (hereinafter referred to
as "OTHER TAXES").

         (c) The Borrower will indemnify each Lender, Issuing Bank and Agent for
the full amount of Taxes and Other Taxes (including any Taxes and any Other
Taxes imposed by any jurisdiction on amounts payable under this Section 5.06)
paid by such Lender, Issuing Bank or



                                       33
   38

Agent (as the case may be) and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted. This indemnification shall be
made within 30 days from the date such Lender, Issuing Bank or Agent (as the
case may be) makes written demand therefor; provided, that such Lender, Issuing
Bank or Agent (as the case may be) shall not be entitled to demand payment under
this Section 5.06 for an amount if such demand is not made within one year
following the date upon which such Lender, Issuing Bank or Agent (as the case
may be) shall have been required to pay such amount.

         (d) Within 30 days after the date of any payment of Taxes, the Borrower
will furnish to the Administrative Agent, at its address referred to in Section
11.02, the original or a certified copy of a receipt evidencing payment thereof.

         (e) Each Bank represents and warrants that either (i) it is organized
under the laws of a jurisdiction within the United States or (ii) it has
delivered to the Borrower or the Administrative Agent duly completed copies of
such form or forms prescribed by the United States Internal Revenue Service
indicating that such Bank is entitled to receive payments without deduction or
withholding of any United States federal income taxes, as permitted by the
Internal Revenue Code of 1986, as amended. Each other Lender agrees that, on or
prior to the date upon which it shall become a party hereto, and upon the
reasonable request from time to time of the Borrower or the Administrative
Agent, such Lender will deliver to the Borrower and the Administrative Agent (to
the extent that it is not prohibited by law from doing so) either (A) a
statement that it is organized under the laws of a jurisdiction within the
United States or (B) duly completed copies of such form or forms as may from
time to time be prescribed by the United States Internal Revenue Service,
indicating that such Lender is entitled to receive payments without deduction or
withholding of any United States federal income taxes, as permitted by the
Internal Revenue Code of 1986, as amended. Each Bank that has delivered, and
each other Lender that hereafter delivers, to the Borrower and the
Administrative Agent the form or forms referred to in the two preceding
sentences further undertakes to deliver to the Borrower and the Administrative
Agent, to the extent that it is not prohibited by law from doing so, further
copies of such form or forms, or successor applicable form or forms, as the case
may be, as and when any previous form filed by it hereunder shall expire or
shall become incomplete or inaccurate in any respect. Each Lender represents and
warrants that each such form supplied by it to the Administrative Agent and the
Borrower pursuant to this subsection (e), and not superseded by another form
supplied by it, is or will be, as the case may be, complete and accurate.

                                   ARTICLE VI
                              CONDITIONS PRECEDENT

         SECTION 6.01. CONDITIONS PRECEDENT TO THE INITIAL EXTENSION OF CREDIT.
The obligation of each Lender to make its initial Extension of Credit is subject
to the fulfillment of the following conditions precedent:

         (a) The Administrative Agent shall have received, on or before the day
of the initial Extension of Credit, the following, each dated such day (except
where specified otherwise below), in form and substance satisfactory to each
Lender (except where otherwise specified below) and (except for any Promissory
Notes) in sufficient copies for each Lender:

                                       34
   39

              (i) Certified copies of the resolutions of the Board of Directors,
         or of the Executive Committee of the Board of Directors, of the
         Borrower authorizing the Borrower to enter into this Agreement and the
         other Loan Documents to which it is, or is to be, a party, and of all
         documents evidencing other necessary corporate action and Governmental
         Approvals, if any, with respect to this Agreement and such Loan
         Documents.

              (ii) A certificate of the Secretary or an Assistant Secretary of
         the Borrower certifying the names, true signatures and incumbency of
         (A) the officers of the Borrower authorized to sign this Agreement and
         the other Loan Documents to which it is, or is to be, a party, and the
         other documents to be delivered hereunder and thereunder and (B) the
         representatives of the Borrower authorized to sign notices to be
         provided under this Agreement and the other Loan Documents to which it
         is, or is to be, a party, which representatives shall be acceptable to
         the Administrative Agent.

              (iii) Copies of the Certificate of Incorporation (or comparable
         charter document) and by-laws of the Borrower, together with all
         amendments thereto, certified by the Secretary or an Assistant
         Secretary of the Borrower.

              (iv) An irrevocable notice from the Borrower requesting
         termination of the "Commitments" under the Existing Credit Agreement
         effective automatically on such date upon the satisfaction (or waiver)
         of the other conditions precedent set forth in this Section 6.01.

              (v) The Promissory Notes (if requested by any Lender pursuant to
         Section 3.01(d)), duly executed by the Borrower.

              (vi) The Cash Collateral Agreement duly executed by the Borrower
         together with evidence of the completion of all other actions as may be
         necessary or, in the opinion of the Administrative Agent and counsel
         for the Administrative Agent, desirable to perfect the security
         interests and liens created thereby.

              (vii) A certified copy of Schedule II hereto, in form and
         substance reasonably satisfactory to the Administrative Agent setting
         forth:

                    (A) all Project Finance Debt of the Consolidated
              Subsidiaries, together with the Borrower's Ownership Interest in
              each such Consolidated Subsidiary; and

                    (B) debt (as such term is construed in accordance with GAAP)
              of Enterprises as of the Closing Date.

              (viii) Favorable opinions of:

                    (A) Michael D. VanHemert, Esq., Assistant General Counsel of
              the Borrower, in substantially the form of Exhibit D and as to
              such other matters as the Required Lenders, through the
              Administrative Agent, may reasonably request; and


                                       35
   40


                    (B) Sidley & Austin, counsel to the Administrative Agent, in
              substantially the form of Exhibit E and as to such other matters
              as the Administrative Agent may reasonably request.

              (ix) A letter from The Chase Manhattan Bank, confirming that the
         participation obligations of each Existing Bank have been terminated
         with respect to each Existing Letter of Credit.

         (b) The Existing Credit Agreement has been (or will have been, upon the
first Extension of Credit and the application of the proceeds thereof) paid in
full, the commitments thereunder terminated and all letters of credit issued
thereunder (other than Existing Letters of Credit) either cash collateralized,
canceled or replaced.

         (c) The following statements shall be true and the Administrative Agent
shall have received a certificate of a duly authorized officer of the Borrower,
dated the Closing Date and in sufficient copies for each Lender stating that:

              (i) the representations and warranties set forth in Section 7.01
         of this Agreement and Section 7 of the Cash Collateral Agreement are
         true and correct on and as of the Closing Date as though made on and as
         of such date, and

              (ii) no event has occurred and is continuing that constitutes a
         Default or an Event of Default.

         (d) The Borrower shall have paid all fees under or referenced in
Section 2.02 and all expenses referenced in Section 11.04(a), in each case to
the extent then due and payable.

         (e) All Governmental Approvals necessary in connection with the Loan
Documents and the transactions contemplated thereby shall have been obtained and
be in full force and effect. All third party approvals necessary or, in the
judgment of the Administrative Agent, advisable in connection with the Loan
Documents and the transactions contemplated thereby shall have been obtained and
be in full force and effect.

         (f) The Lenders shall have received (i) audited consolidated financial
statements of the Borrower for the two most recent fiscal years ended prior to
the Closing Date as to which such financial statements are available and (ii)
unaudited financial statements of the Borrower for each fiscal quarterly period
ended subsequent to the date of the latest financial statements delivered
pursuant to clause (i) of this paragraph as to which such financial statements
are available. The business, assets, property and financial condition of the
Borrower and its Subsidiaries as reflected in such financial statements shall be
satisfactory to the Lenders.

         SECTION 6.02. CONDITIONS PRECEDENT TO EACH EXTENSION OF CREDIT. The
obligation of each Lender or Issuing Bank, as the case may be, to make an
Extension of Credit (including the initial Extension of Credit) shall be subject
to the further conditions precedent that, on the date of such Extension of
Credit and after giving effect thereto:

         (a) The following statements shall be true (and each of the giving of
the applicable notice or request with respect thereto and the making of such
Extension of Credit without prior



                                       36
   41

correction by the Borrower shall (to the extent that such correction has been
previously consented to by the Lenders and the Issuing Banks) constitute a
representation and warranty by the Borrower that, on the date of such Extension
of Credit, such statements are true):

              (i) the representations and warranties contained in Section 7.01
         of this Agreement (other than those contained in subsections (e)(ii)
         and (f) thereof) and in Section 7 of the Cash Collateral Agreement are
         correct on and as of the date of such Extension of Credit, before and
         after giving effect to such Extension of Credit and to the application
         of the proceeds thereof, as though made on and as of such date; and

              (ii) no Default or Event of Default has occurred and is
         continuing, or would result from such Extension of Credit or the
         application of the proceeds thereof.

         (b) The Administrative Agent shall have received such other approvals,
opinions and documents as any Lender or Issuing Bank, through the Administrative
Agent, may reasonably request as to the legality, validity, binding effect or
enforceability of the Loan Documents or the financial condition, results of
operations, properties or business of the Borrower and its Consolidated
Subsidiaries.

         SECTION 6.03. CONDITIONS PRECEDENT TO CERTAIN EXTENSIONS OF CREDIT. The
obligation of each Lender or Issuing Bank, as the case may be, to make an
Extension of Credit (including the initial Extension of Credit) that would
(after giving effect to all Extensions of Credit on such date and the
application of proceeds thereof) increase the principal amount outstanding
hereunder, or to make an Extension of Credit of the type described in clause
(ii) or (iii) of the definition thereof (except any amendment of a Letter of
Credit the sole effects of which are to extend the stated termination date
thereof and/or to make nonmaterial modifications thereto), shall be subject to
the further conditions precedent that, on the date of such Extension of Credit
and after giving effect thereto:

         (a) the following statements shall be true (and each of the giving of
the applicable notice or request with respect thereto and the making of such
Extension of Credit without prior correction by the Borrower shall (to the
extent that such correction has been previously consented to by the Lenders and
the Issuing Banks) constitute a representation and warranty by the Borrower
that, on the date of such Extension of Credit, such statements are true):

              (i) the representations and warranties contained in subsections
         (e)(ii) and (f) of Section 7.01 of this Agreement are correct on and as
         of the date of such Extension of Credit, before and after giving effect
         to such Extension of Credit and to the application of the proceeds
         thereof, as though made on and as of such date; and

              (ii) no Default or Event of Default has occurred and is
         continuing, or would result from such Extension of Credit or the
         application of the proceeds thereof; and

         (b) the Administrative Agent shall have received such other approvals,
opinions and documents as any Lender or Issuing Bank, through the Administrative
Agent, may reasonably request.



                                       37
   42

         SECTION 6.04. RELIANCE ON CERTIFICATES. The Lenders, the Issuing Banks
and each Agent shall be entitled to rely conclusively upon the certificates
delivered from time to time by officers of the Borrower as to the names,
incumbency, authority and signatures of the respective persons named therein
until such time as the Administrative Agent may receive a replacement
certificate, in form acceptable to the Administrative Agent, from an officer of
such Person identified to the Administrative Agent as having authority to
deliver such certificate, setting forth the names and true signatures of the
officers and other representatives of such Person thereafter authorized to act
on behalf of such Person.

                                  ARTICLE VII
                         REPRESENTATIONS AND WARRANTIES

         SECTION 7.01. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants as follows:

         (a) Each of the Borrower, Consumers and each of the Restricted
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the state of its incorporation and is duly qualified
to do business in, and is in good standing in, all other jurisdictions where the
nature of its business or the nature of property owned or used by it makes such
qualification necessary.

         (b) The execution, delivery and performance by the Borrower of each
Loan Document to which it is or will be a party (i) are within the Borrower's
corporate powers, (ii) have been duly authorized by all necessary corporate
action and (iii) do not and will not (A) require any consent or approval of the
stockholders of the Borrower, (B) violate any provision of the charter or
by-laws of the Borrower or of law, (C) violate any legal restriction binding on
or affecting the Borrower, (D) result in a breach of, or constitute a default
under, any indenture or loan or credit agreement or any other agreement, lease
or instrument to which the Borrower is a party or by which it or its properties
may be bound or affected, or (E) result in or require the creation of any Lien
(other than pursuant to the Loan Documents) upon or with respect to any of its
properties.

         (c) No Governmental Approval is required.

         (d) This Agreement is, and each other Loan Document to which the
Borrower will be a party when executed and delivered hereunder will be, legal,
valid and binding obligations of the Borrower enforceable against the Borrower
in accordance with their respective terms; subject to the qualification,
however, that the enforcement of the rights and remedies herein and therein is
subject to bankruptcy and other similar laws of general application affecting
rights and remedies of creditors and the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at law).

         (e) (i) The consolidated balance sheet of the Borrower and its
Consolidated Subsidiaries as at December 31, 1999, and the related consolidated
statements of income, retained earnings and cash flows of the Borrower and its
Consolidated Subsidiaries for the fiscal year then ended, together with the
report thereon of Arthur Andersen LLP included in the Borrower's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999, and the



                                       38
   43

unaudited consolidated balance sheet of the Borrower and its Consolidated
Subsidiaries as at March 31, 2000, and the related unaudited consolidated
statements of income, retained earnings and cash flows for the three-month
period then ended, copies of each of which have been furnished to each Lender,
fairly present (subject, in the case of such balance sheet and statement of
income for the three months ended March 31, 2000, to year-end adjustments) the
financial condition of the Borrower and its Consolidated Subsidiaries as at such
dates and the results of operations of the Borrower and its Consolidated
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles consistently applied; (ii) since March
31, 2000, there has been no Material Adverse Change; and (iii) the Borrower has
no material liabilities or obligations except as reflected in the foregoing
financial statements and in Schedule II, as evidenced by the Loan Documents and
as may be incurred, in accordance with the terms of this Agreement, in the
ordinary course of business (as presently conducted) following the date of this
Agreement.

         (f) Except as disclosed in the Borrower's Annual Report on Form 10-K
for the fiscal year ended December 31, 1999, the Borrower's Quarterly Report on
Form 10-Q for the period ended March 31, 2000 and the Current Report on Form 8-K
filed by the Borrower on June 5, 2000, there are no pending or threatened
actions, suits or proceedings against or, to the knowledge of the Borrower,
affecting the Borrower or any of its Subsidiaries or the properties of the
Borrower or any of its Subsidiaries before any court, governmental agency or
arbitrator, that would, if adversely determined, reasonably be expected to
materially adversely affect the financial condition, properties, business or
operations of the Borrower and its Subsidiaries, considered as a whole, or
affect the legality, validity or enforceability of this Agreement or any other
Loan Document.

         (g) All insurance required by Section 8.01(b) is in full force and
effect.

         (h) No Plan Termination Event has occurred nor is reasonably expected
to occur with respect to any Plan of the Borrower or any of its ERISA Affiliates
which would result in a material liability to the Borrower, except as disclosed
and consented to by the Required Lenders in writing from time to time. Since the
date of the most recent Schedule B (Actuarial Information) to the annual report
of the Borrower (Form 5500 Series), if any, there has been no material adverse
change in the funding status of the Plans referred therein and no "prohibited
transaction" has occurred with respect thereto which is reasonably expected to
result in a material liability to the Borrower. Neither the Borrower nor any of
its ERISA Affiliates has incurred nor reasonably expects to incur any material
withdrawal liability under ERISA to any Multiemployer Plan, except as disclosed
and consented to by the Required Lenders in writing from time to time.

         (i) No fire, explosion, accident, strike, lockout or other labor
dispute, drought, storm, hail, earthquake, embargo, act of God or of the public
enemy or other casualty (except for any such circumstance, if any, which is
covered by insurance which coverage has been confirmed and not disputed by the
relevant insurer) affecting the properties, business or operations of the
Borrower, Consumers or any Restricted Subsidiary has occurred that could
reasonably be expected to have a material adverse effect on the business,
financial condition or results of operations of (A) the Borrower and its
Subsidiaries, considered as a whole, or (B) Consumers and its Subsidiaries,
considered as a whole.

                                       39
   44
     (j) The Borrower and its Subsidiaries have filed all tax returns (Federal,
state and local) required to be filed and paid all taxes shown thereon to be
due, including interest and penalties, or, to the extent the Borrower or any of
its Subsidiaries is contesting in good faith an assertion of liability based on
such returns, has provided adequate reserves for payment thereof in accordance
with GAAP.

     (k) No extraordinary judicial, regulatory or other legal constraints exist
which limit or restrict Consumers' ability to declare or pay cash dividends with
respect to its capital stock.

     (l) The Borrower owns not less than 80% of the outstanding shares of common
stock of Enterprises.

     (m) The Borrower owns not less than 80% of the outstanding shares of common
stock of Consumers.

     (n) The Consolidated 2000-2004 Projections of Consumers, Enterprises and
the Borrower (the "PROJECTIONS"), copies of which have been distributed to the
Banks in the Confidential Information Memorandum dated May 2000, are based upon
assumptions that the Borrower believed were reasonable at the time the
Projections were delivered, and all other financial information previously
delivered by the Borrower to the Administrative Agent are true and correct in
all material respects as at the dates and for the periods indicated therein.

     (o) The executed and delivered Cash Collateral Agreement creates a valid,
perfected, first priority Lien in the Collateral (other than the "Account", as
such term is defined therein) described therein, subject only to Liens permitted
by Section 8.02(a), and all filings and other actions necessary to perfect and
protect such security interests have been taken.

     (p) The Borrower is not engaged in the business of extending credit for the
purpose of buying or carrying margin stock (within the meaning of Regulation U
issued by the Board), and no proceeds of any Loan or any drawing under any
Letter of Credit will be used to buy or carry any margin stock or to extend
credit to others for the purpose of buying or carrying any margin stock.

     (q) The Borrower is not an investment company (within the meaning of the
Investment Company Act of 1940, as amended).

     (r) No proceeds of any Extension of Credit or any drawing under any Letter
of Credit will be used to acquire any security in any transaction without the
approval of the board of directors of the Person issuing such security if (i)
the acquisition of such security would cause the Borrower to own 5.0% or more of
any outstanding class of securities issued by such Person, or (ii) such security
is being acquired in connection with a tender offer.

     (s) Following application of the proceeds of each Extension of Credit, not
more than 25 percent of the value of the assets of the Borrower and its
Subsidiaries on a consolidated basis will be margin stock (within the meaning of
Regulation U issued by the Board).

                                       40

   45


                                  ARTICLE VIII
                            COVENANTS OF THE BORROWER

     SECTION 8.01. AFFIRMATIVE COVENANTS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid, any
Letter of Credit shall remain outstanding or any Lender shall have any
Commitment:

     (a) Payment of Taxes, Etc. The Borrower shall pay and discharge, and each
of its Subsidiaries shall pay and discharge, before the same shall become
delinquent, all taxes, assessments and governmental charges, royalties or levies
imposed upon it or upon its property except, in the case of taxes, to the extent
the Borrower or any Subsidiary, as the case may be, is contesting the same in
good faith and by appropriate proceedings and has set aside adequate reserves
for the payment thereof in accordance with GAAP.

     (b) Maintenance of Insurance. The Borrower shall maintain, and each of its
Restricted Subsidiaries and Consumers shall maintain, insurance covering the
Borrower, each of its Restricted Subsidiaries, Consumers and their respective
properties in effect at all times in such amounts and covering such risks as is
usually carried by companies engaged in similar businesses and owning similar
properties in the same general geographical area in which the Borrower, its
Restricted Subsidiaries and Consumers operates, either with reputable insurance
companies or, in whole or in part, by establishing reserves of one or more
insurance funds, either alone or with other corporations or associations.

     (c) Preservation of Existence, Etc. The Borrower shall preserve and
maintain, and each of its Restricted Subsidiaries and Consumers shall preserve
and maintain, its corporate existence, material rights (statutory and otherwise)
and franchises, and take such other action as may be necessary or advisable to
preserve and maintain its right to conduct its business in the states where it
shall be conducting its business.

     (d) Compliance with Laws, Etc. The Borrower shall comply, and each of its
Restricted Subsidiaries and Consumers shall comply, in all material respects
with the requirements of all applicable laws, rules, regulations and orders of
any governmental authority, including any such laws, rules, regulations and
orders relating to zoning, environmental protection, use and disposal of
Hazardous Substances, land use, construction and building restrictions, and
employee safety and health matters relating to business operations.

     (e) Inspection Rights. Subject to the requirements of laws or regulations
applicable to the Borrower or its Subsidiaries, as the case may be, and in
effect at the time, at any time and from time to time upon reasonable notice,
the Borrower shall permit (i) each Agent and its agents and representatives to
examine and make copies of and abstracts from the records and books of account
of, and the properties of, the Borrower or any of its Subsidiaries and (ii) each
Agent, each Issuing Bank, each of the Lenders, and their respective agents and
representatives to discuss the affairs, finances and accounts of the Borrower
and its Subsidiaries with the Borrower and its Subsidiaries and their respective
officers, directors and accountants, in each case, to the extent that any
out-of-pocket expenses are incurred in connection therewith at such time as no
Event of Default or Default shall have occurred and be continuing, at the
expense of such Agent, such Issuing Bank, such Lender, or their respective
agents and representatives, as the case may be.

                                       41

   46



     (f) Keeping of Books. The Borrower shall keep, and each of its Subsidiaries
shall keep, proper records and books of account, in which full and correct
entries shall be made of all financial transactions of the Borrower and its
Subsidiaries and the assets and business of the Borrower and its Subsidiaries,
in accordance with GAAP.

     (g) Maintenance of Properties, Etc. The Borrower shall maintain, and each
of its Restricted Subsidiaries shall maintain, in substantial conformity with
all laws and material contractual obligations, good and marketable title to all
of its properties which are used or useful in the conduct of its business;
provided, however, that the foregoing shall not restrict the sale of any asset
of the Borrower or any Restricted Subsidiary to the extent not prohibited by
Section 8.02(i). In addition, the Borrower shall preserve, maintain, develop,
and operate, and each of its Subsidiaries shall preserve, maintain, develop and
operate, in substantial conformity with all laws and material contractual
obligations, all of its material properties which are used or useful in the
conduct of its business in good working order and condition, ordinary wear and
tear excepted.

     (h) Use of Proceeds. The Borrower shall apply the proceeds of the initial
Extensions of Credit, to the extent necessary, to the repayment in full and
termination of all outstanding obligations under the Existing Credit Agreement,
whether for principal, interest, fees, or otherwise (and, in furtherance
thereof, the Borrower hereby expressly and irrevocably authorizes the
Administrative Agent to so apply such proceeds to such repayment), and use all
subsequent Extensions of Credit for general corporate purposes (subject to the
terms and conditions of this Agreement).

     (i) Consolidated Leverage Ratio. The Borrower shall maintain, as of the
last day of each fiscal quarter (in each case, the "MEASUREMENT QUARTER"), a
maximum ratio of (i) Consolidated Debt for the immediately preceding
four-fiscal-quarter period ending on the last day of such Measurement Quarter,
to (ii) Consolidated EBITDA for such period, of not more than the amount set
forth below during each corresponding period set forth below:



                         PERIOD                                  RATIO
                   --------------------                     ----------------
                                                         
                   Closing Date through
                   September 30, 2000                         5.5 to 1

                   October 1, 2000 and                        5.4 to 1
                   thereafter



     (j) Cash Dividend Coverage Ratio. The Borrower shall maintain, as of the
last day of each Measurement Quarter, a minimum ratio of (i) the sum of (A) Cash
Dividend Income for the immediately preceding four-fiscal-quarter period ending
on the last day of the fiscal quarter immediately preceding such Measurement
Quarter, plus (B) 25% of the amount of Equity Distributions received by the
Borrower during such period but in no event in excess of $10,000,000, plus (C)
all amounts received by the Borrower from its Subsidiaries and Affiliates during
such period constituting reimbursement of interest expense (including
commitment, guaranty and letter of credit fees) paid by the Borrower on behalf
of any such Subsidiary or Affiliate to (ii) interest expense (including
commitment, guaranty and letter of credit fees)


                                       42

   47

accrued by the Borrower in respect of all Debt during such period of not less
than 1.5 to 1.0; provided, that the Borrower shall be deemed not to be in breach
of the foregoing covenant if, during the Measurement Quarter, it has permanently
reduced the Commitments and the principal amount outstanding under this
Agreement and the Promissory Notes such that the amount determined pursuant to
clause (ii) above, when recalculated on a pro forma basis assuming that the
amount of such reduced Commitments and principal amount outstanding under this
Agreement and the Promissory Notes were in effect at all times during such
four-fiscal-quarter period, would result in the Borrower being in compliance
with such ratio; and provided further, that until the Borrower so reduces such
Commitments and principal amount outstanding under this Agreement and the
Promissory Notes and/or increases Cash Dividend Income during such Measurement
Quarter, the Borrower may not request any additional Extensions of Credit (other
than Conversions).

     (k) Refinancing of Senior Note Debt. In connection with any refinancings of
the Senior Note Debt, the Borrower shall cause the maturity thereof to be no
sooner than the then-scheduled maturity date of the Senior Notes being
refinanced.

     (l) Further Assurances. The Borrower shall promptly execute and deliver all
further instruments and documents, and take all further action, that may be
necessary or that any Lender through the Administrative Agent may reasonably
request in order to give effect to the transactions contemplated by this
Agreement and the other Loan Documents. In addition, the Borrower will use all
reasonable efforts to duly obtain or make Governmental Approvals required from
time to time on or prior to such date as the same may become legally required.

     SECTION 8.02. NEGATIVE COVENANTS. So long as any Loan or any other amount
payable hereunder or under any Promissory Note shall remain unpaid, any Letter
of Credit shall remain outstanding or any Lender shall have any Commitment, the
Borrower shall not, without the written consent of the Required Lenders:

     (a) Liens, Etc. Create, incur, assume or suffer to exist, or permit any of
its Restricted Subsidiaries to create, incur, assume or suffer to exist, any
lien, security interest, or other charge or encumbrance (including the lien or
retained security title of a conditional vendor) of any kind, or any other type
of arrangement intended or having the effect of conferring upon a creditor a
preferential interest upon or with respect to any of its properties of any
character (including capital stock of Consumers, Enterprises, CMS Oil & Gas Co.
and any of the Borrower's other directly-owned Subsidiaries, and accounts) (any
of the foregoing being referred to herein as a "LIEN"), whether now owned or
hereafter acquired, or sign or file, or permit any of its Restricted
Subsidiaries to sign or file, under the Uniform Commercial Code of any
jurisdiction a financing statement which names the Borrower or any Restricted
Subsidiary as debtor, sign, or permit any of its Restricted Subsidiaries to
sign, any security agreement authorizing any secured party thereunder to file
such financing statement, or assign, or permit any of its Restricted
Subsidiaries to assign, accounts, excluding, however, from the operation of the
foregoing restrictions the Liens created under the Loan Documents and the
following:

          (i) Liens for taxes, assessments or governmental charges or levies to
     the extent not past due;

                                       43
   48

          (ii) cash pledges or deposits to secure (A) obligations under
     workmen's compensation laws or similar legislation, (B) public or statutory
     obligations of the Borrower or any of its Restricted Subsidiaries, or (C)
     Support Obligations of the Borrower; provided that the aggregate amount of
     pledges or deposits securing such Support Obligations shall not exceed $30
     million at any one time outstanding;

          (iii) Liens imposed by law, such as materialmen's, mechanics',
     carriers', workmen's and repairmen's liens and other similar Liens arising
     in the ordinary course of business securing obligations which are not
     overdue or which have been fully bonded and are being contested in good
     faith; and

          (iv) purchase money Liens or purchase money security interests upon or
     in property acquired or held by the Borrower or any of its Restricted
     Subsidiaries in the ordinary course of business to secure the purchase
     price of such property or to secure indebtedness incurred solely for the
     purpose of financing the acquisition of any such property to be subject to
     such Liens or security interests, or Liens or security interests existing
     on any such property at the time of acquisition, or extensions, renewals or
     replacements of any of the foregoing for the same or a lesser amount,
     provided that no such Lien or security interest shall extend to or cover
     any property other than the property being acquired and no such extension,
     renewal or replacement shall extend to or cover property not theretofore
     subject to the Lien or security interest being extended, renewed or
     replaced, and provided, further, that the aggregate principal amount of the
     Debt at any one time outstanding secured by Liens permitted by this clause
     (iv) shall not exceed $10,000,000.

     (b) Enterprises Debt. Permit Enterprises to create, incur, assume or suffer
to exist any debt (as such term is construed in accordance with GAAP) other
than:

          (i) debt arising by reason of the endorsement of negotiable
     instruments for deposit or collection or similar transactions in the
     ordinary course of Enterprises' business;

          (ii) in the form of indemnities in respect of unfiled mechanics' liens
     and Liens affecting Enterprises' properties permitted under Section
     8.02(a)(iii);

          (iii) other debt of Enterprises outstanding on the Closing Date set
     forth on Schedule II; and

          (iv) unsecured, subordinated debt owed to the Borrower or CMS Capital
     Corp.

     (c) Lease Obligations. Create, incur, assume or suffer to exist, or permit
any of its Restricted Subsidiaries to create, incur, assume or suffer to exist,
any obligations as lessee for the rental or hire of real or personal property of
any kind under leases or agreements to lease (other than leases which constitute
Debt) having an original term of one year or more which would cause the
aggregate direct or contingent liabilities of the Borrower and its Restricted
Subsidiaries in respect of all such obligations payable in any period of 12
consecutive calendar months to exceed $50,000,000.

                                       44

   49

     (d) Investments in Other Persons. Upon the occurrence and during the
continuance of an Event of Default or a Default (other than a Default that
occurs and is continuing prior to the last day of any Measurement Quarter
resulting from the failure of the Borrower to comply with the ratio set forth in
Section 8.01(j)), make, or permit any of its Restricted Subsidiaries to make,
any loan or advance to any Person or purchase or otherwise acquire any capital
stock, obligations or other securities of, make any capital contribution to, or
otherwise invest in, any Person, other than Permitted Investments.

     (e) Restricted Payments. Declare or pay, or permit any of its Restricted
Subsidiaries to declare or pay, directly or indirectly, any dividend, payment or
other distribution of assets, properties, cash, rights, obligations or
securities on account of any share of any class of capital stock of the Borrower
or any of its Restricted Subsidiaries (other than (1) stock splits and dividends
payable solely in nonconvertible equity securities of the Borrower and (2)
distributions made to the Borrower or a Restricted Subsidiary), or purchase,
redeem, retire, or otherwise acquire for value, or permit any of its Restricted
Subsidiaries to purchase, redeem, retire, or otherwise acquire for value, any
shares of any class of capital stock of the Borrower or any of its Restricted
Subsidiaries or any warrants, rights, or options to acquire any such shares, now
or hereafter outstanding, or make, or permit any of its Restricted Subsidiaries
to make, any distribution of assets to any of its shareholders (other than
distributions to the Borrower or a Restricted Subsidiary) (any such dividend,
payment, distribution, purchase, redemption, retirement or acquisition being
hereinafter referred to as a "RESTRICTED PAYMENT"), unless (i) no Default or
Event of Default has occurred and is continuing or would occur as a result of
such Restricted Payment, and (ii) after giving effect thereto, the aggregate
amount of all such Restricted Payments made since September 30, 1993 shall not
have exceeded the sum of (A) $120,000,000, (B) 100% of Consolidated Net Income
(as defined in the Indenture in effect on the date hereof) accrued during the
period (treated as one accounting period) from September 30, 1993 to the end of
the most recent fiscal quarter of the Borrower ending at least 45 days prior to
the date of such Restricted Payment (or, in case such amount shall be a deficit,
minus 100% of such deficit), and (C) the aggregate Net Proceeds (as defined in
the Indenture in effect on the date hereof) received by the Borrower from any
issuance or sale of, or contribution with respect to, its capital stock
subsequent to September 30, 1993; provided, however, that the foregoing shall
not prohibit (1) any purchase or redemption of capital stock of the Borrower
made by exchange for, or out of the proceeds of the substantially concurrent
sale of, capital stock of the Borrower (other than Redeemable Stock or
Exchangeable Stock (as such terms are defined in the Indenture in effect on the
date hereof)), provided that such purchase or redemption shall be excluded from
the calculation of the amount of Restricted Payments permitted by this
subsection (e); (2) dividends or other distributions paid in respect of any
class of the Borrower's capital stock issued in respect of the acquisition of
any business or assets by the Borrower or a Restricted Subsidiary where the
dividends or other distributions with respect to such capital stock are payable
solely from the net earnings of such business or assets; (3) dividends paid
within 60 days after the date of declaration thereof if at such date of
declaration such dividend would have complied with this subsection (e), provided
that at the time of payment of such dividend, no Default or Event of Default
shall have occurred and be continuing (or result therefrom), and provided
further that such dividends shall be included (without duplication) in the
calculation of the amount of Restricted Payments permitted by this subsection
(e); or (4) payments made by the Borrower or any Restricted Subsidiary pursuant
to the Tax Sharing Agreement. For purposes of this subsection (e), the amount of
any Restricted Payment not in the

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form of cash shall be the fair market value of such Restricted Payment as
determined in good faith by the Board of Directors of the Borrower, provided
that if the value of the non-cash portion of such Restricted Payment as
determined by the Borrower's Board of Directors is in excess of $25 million,
such value shall be based on an opinion from a nationally-recognized firm
acceptable to the Administrative Agent experienced in the appraisal of similar
types of property or transactions.

     (f) Compliance with ERISA. (i) Permit to exist any "accumulated funding
deficiency" (as defined in Section 412(a) of the Internal Revenue Code of 1986,
as amended), (ii) terminate, or permit any ERISA Affiliate to terminate, any
Plan or withdraw from, or permit any ERISA Affiliate to withdraw from, any
Multiemployer Plan, so as to result in any material (in the opinion of the
Required Lenders) liability of the Borrower, any Restricted Subsidiary or
Consumers to the PBGC, or (iii) permit to exist any occurrence of any Reportable
Event (as defined in Title IV of ERISA), or any other event or condition, which
presents a material (in the opinion of the Required Lenders) risk of such a
termination by the PBGC of any Plan or withdrawal from any Multiemployer Plan
and such a material liability to the Borrower, any Restricted Subsidiary or
Consumers.

     (g) Transactions with Affiliates. Enter into, or permit any of its
Subsidiaries to enter into, any transaction with any of its Affiliates unless
such transaction is on terms no less favorable to the Borrower or such
Subsidiary than if the transaction had been negotiated in good faith on an
arm's-length basis with a non-Affiliate.

     (h) Mergers, Etc. Merge with or into or consolidate with or into, or permit
any of its Restricted Subsidiaries, Consumers or CMS Oil & Gas Co. to merge with
or into or consolidate with or into, any other Person, except that (1) any
Restricted Subsidiary (other than Enterprises) may merge into any other
Restricted Subsidiary; (2) CMS Oil & Gas Co. may merge with or into Enterprises
or the Borrower; (3) CMS Oil & Gas Co. may merge with or into any other Person,
provided that, in connection with such merger, Enterprises shall have received
fair consideration (as determined by the Board of Directors of Enterprises or
the Borrower); (4) any Restricted Subsidiary may merge with or into the
Borrower, and the Borrower may merge with any other Person, provided that,
immediately after giving effect to any such merger, (A) no event shall occur and
be continuing which constitutes a Default or an Event of Default, (B) the
Borrower is the surviving corporation, and (C) the Borrower shall not be liable
with respect to any Debt or allow its property to be subject to any Lien which
it could not become liable with respect to or allow its property to become
subject to under this Agreement or any other Loan Document on the date of such
transaction; (5) Consumers may merge with any other Person, provided that,
immediately after giving effect thereto, (w) no event shall occur and be
continuing which constitutes a Default or an Event of Default, (x) Consumers is
the surviving corporation, (y) the Borrower shall continue to own not less than
80% of the outstanding shares of common stock of Consumers and (z) Consumers'
Net Worth shall be equal to or greater than its Net Worth immediately prior to
such merger; and (6) any Person (other than the Borrower and its Affiliates) may
merge with or into Enterprises, provided that, immediately after giving effect
thereto, (A) no event shall occur and be continuing which constitutes a Default
or an Event of Default, (B) Enterprises is the surviving corporation, (C)
Enterprises' Net Worth shall be equal to or greater than its Net Worth
immediately prior to such merger and (D) Enterprises shall not be liable with
respect to any Debt or allow its property to be subject to any Lien which it
could not become


                                       46
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liable with respect to or allow its property to become subject to under this
Agreement or any other Loan Document on the date of such transaction; provided,
that after giving effect to any merger described in clause (2), (3), or (5)
above, the Borrower shall be in compliance with Section 8.01(i).

     (i) Sales, Etc., of Assets. Sell, lease, transfer, assign, or otherwise
dispose of all or any substantial part of its assets, or permit any of its
Restricted Subsidiaries to sell, lease, transfer, or otherwise dispose of all or
any substantial part of its assets, except to give effect to a transaction
permitted by subsection (h) above or subsection (j) below.

     (j) Maintenance of Ownership of Subsidiaries. Sell, transfer, assign or
otherwise dispose of any shares of capital stock of any of its Restricted
Subsidiaries or Consumers (other than preferred or preference stock of
Consumers) or any warrants, rights or options to acquire such capital stock, or
permit any Restricted Subsidiary or Consumers to issue, sell, transfer, assign
or otherwise dispose of any shares of its capital stock (other than preferred or
preference stock of Consumers) or the capital stock of any other Restricted
Subsidiary or any warrants, rights or options to acquire such capital stock,
except to give effect to a transaction permitted by subsection (h) above;
provided, however, that (i) the Borrower may sell, transfer, assign or otherwise
dispose of not more than 20% of the common stock of Consumers, provided that
after giving effect to each such transaction the Borrower shall be in compliance
with Section 8.01(i), (ii) the Borrower may sell, transfer, assign or otherwise
dispose of not more than 20% of the common stock of Enterprises, provided that
any proceeds in the form of cash from such sale, transfer, assignment or other
disposal of the common stock of Enterprises shall be applied to prepay the
principal amount outstanding hereunder (it being understood that any prepayment
required by this clause (ii) shall be applied to outstanding ABR Loans up to the
full amount thereof before they are applied to outstanding Eurodollar Rate
Loans) together with (A) accrued interest to the date of such prepayment on the
principal amount repaid and (B) in the case of prepayments of Eurodollar Rate
Loans, any amount payable to the Lenders pursuant to Section 5.04(b), and
provided, further that after giving effect to each such transaction the Borrower
shall be in compliance with Section 8.01(i), and (iii) Enterprises may, and the
Borrower may permit Enterprises to, sell, transfer, assign or otherwise dispose
of not more than 49% of the common stock of any Enterprises Significant
Subsidiary, provided that after giving effect to each such transaction the
Borrower shall be in compliance with Section 8.01(i).

     (k) Amendment of Tax Sharing Agreement. Directly or indirectly, amend,
modify, supplement, waive compliance with, seek a waiver under, or assent to
noncompliance with, any term, provision or condition of the Tax Sharing
Agreement if the effect of such amendment, modification, supplement, waiver or
assent is to (i) reduce materially any amounts otherwise payable to, or increase
materially any amounts otherwise owing or payable by, the Borrower thereunder,
or (ii) change materially the timing of any payments made by or to the Borrower
thereunder.

     SECTION 8.03. REPORTING OBLIGATIONS. So long as any Loan or any other
amount payable hereunder or under any Promissory Note shall remain unpaid, any
Letter of Credit shall remain outstanding or any Lender shall have any
Commitment, the Borrower will, unless the Required Lenders shall otherwise
consent in writing, furnish to the Administrative Agent (with sufficient copies
for each Lender), the following:



                                       47
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     (a) as soon as possible and in any event within five days after the
Borrower knows or should have reason to know of the occurrence of each Default
or Event of Default continuing on the date of such statement, a statement of the
chief financial officer or chief accounting officer of the Borrower setting
forth details of such Default or Event of Default and the action that the
Borrower proposes to take with respect thereto;

     (b) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Borrower, a
consolidated balance sheet of the Borrower and its Subsidiaries as at the end of
such quarter and consolidated statements of income and retained earnings and of
cash flows of the Borrower and its Subsidiaries for the period commencing at the
end of the previous fiscal year and ending with the end of such quarter (which
requirement shall be deemed satisfied by the delivery of the Borrower's
quarterly report on Form 10-Q for such quarter), all in reasonable detail and
duly certified (subject to year-end audit adjustments) by the chief financial
officer or chief accounting officer of the Borrower as having been prepared in
accordance with GAAP, together with (A) a schedule (substantially in the form of
Exhibit F appropriately completed) of (1) the computations used by the Borrower
in determining compliance with the covenants contained in Sections 8.01(i) and
8.01(j) and, after the enactment of any Consumers Dividend Restriction, the
ratio set forth in Section 9.01(k), (2) all Project Finance Debt of the
Consolidated Subsidiaries, together with the Borrower's Ownership Interest in
each such Consolidated Subsidiary and (3) all Support Obligations of the
Borrower of the types described in clauses (iv) and (v) of the definition of
Support Obligations (whether or not each such Support Obligation or the primary
obligation so supported is fixed, conclusively determined or reasonably
quantifiable) to the extent such Support Obligations have not been previously
disclosed as "Consolidated Debt" pursuant to clause (1) above, and (B) a
certificate of said officer stating that no Default or Event of Default has
occurred and is continuing or, if a Default or Event of Default has occurred and
is continuing, a statement as to the nature thereof and the action that the
Borrower proposes to take with respect thereto;

     (c) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower and its Subsidiaries, a copy of the Annual
Report on Form 10-K (or any successor form) for the Borrower and its
Subsidiaries for such year, including therein a consolidated balance sheet of
the Borrower and its Subsidiaries as of the end of such fiscal year and
consolidated statements of income and retained earnings and of cash flows of the
Borrower and its Subsidiaries for such fiscal year, accompanied by a report
thereon of Arthur Andersen LLP or another nationally-recognized independent
public accounting firm, together with a schedule in form satisfactory to the
Required Lenders of (A) the computations used by such accounting firm in
determining, as of the end such fiscal year, compliance with the covenants
contained in Sections 8.01(i) and 8.01(j) and, after the enactment of any
Consumers Dividend Restriction, the ratio set forth in Section 9.01(k), (B) all
Project Finance Debt of the Consolidated Subsidiaries, together with the
Borrower's Ownership Interest in each such Consolidated Subsidiary and (C) all
Support Obligations of the Borrower of the types described in clauses (iv) and
(v) of the definition of Support Obligations (whether or not each such Support
Obligation or the primary obligation so supported is fixed, conclusively
determined or reasonably quantifiable) to the extent such Support Obligations
have not been previously disclosed as "Consolidated Debt" pursuant to clause (A)
above;



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     (d) as soon as available and in any event within 60 days after the end of
each of the first three quarters of each fiscal year of the Borrower, a balance
sheet of the Borrower as at the end of such quarter and statements of income and
retained earnings and of cash flows of the Borrower for the period commencing at
the end of the previous fiscal year and ending with the end of such quarter, all
in reasonable detail and duly certified (subject to year-end audit adjustments)
by the chief financial officer or chief accounting officer of the Borrower as
having been prepared in accordance with GAAP;

     (e) as soon as available and in any event within 120 days after the end of
each fiscal year of the Borrower, a balance sheet of the Borrower as at the end
of such fiscal year and statements of income and retained earnings and of cash
flows of the Borrower for such fiscal year, all in reasonable detail and duly
certified (subject to year-end audit adjustments) by the chief financial officer
or chief accounting officer of the Borrower as having been prepared in
accordance with GAAP;

     (f) as soon as possible and in any event (A) within 30 days after the
Borrower knows or has reason to know that any Plan Termination Event described
in clause (i) of the definition of Plan Termination Event with respect to any
Plan of the Borrower or any ERISA Affiliate of the Borrower has occurred and
could reasonably be expected to result in a material liability to the Borrower
and (B) within 10 days after the Borrower knows or has reason to know that any
other Plan Termination Event with respect to any Plan of the Borrower or any
ERISA Affiliate of the Borrower has occurred and could reasonably be expected to
result in a material liability to the Borrower, a statement of the chief
financial officer or chief accounting officer of the Borrower describing such
Plan Termination Event and the action, if any, which the Borrower proposes to
take with respect thereto;

     (g) promptly after receipt thereof by the Borrower or any of its ERISA
Affiliates from the PBGC copies of each notice received by the Borrower or any
such ERISA Affiliate of the PBGC's intention to terminate any Plan or to have a
trustee appointed to administer any Plan;

     (h) promptly and in any event within 30 days after the filing thereof with
the Internal Revenue Service, copies of each Schedule B (Actuarial Information)
to the annual report (Form 5500 Series) with respect to each Plan (if any) to
which the Borrower is a contributing employer;

     (i) promptly after receipt thereof by the Borrower or any of its ERISA
Affiliates from a Multiemployer Plan sponsor, a copy of each notice received by
the Borrower or any of its ERISA Affiliates concerning the imposition or amount
of withdrawal liability in an aggregate principal amount of at least $250,000
pursuant to Section 4202 of ERISA in respect of which the Borrower is reasonably
expected to be liable;

     (j) promptly after the Borrower becomes aware of the occurrence thereof,
notice of all actions, suits, proceedings or other events of the type described
in Section 7.01(f);

     (k) promptly after the sending or filing thereof, notice to the
Administrative Agent and each Lender of any sending or filing of all proxy
statements, financial statements and reports which the Borrower sends to its
public security holders (if any), all regular, periodic and special reports
which the Borrower files with the Securities and Exchange Commission or any



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governmental authority which may be substituted therefor, or with any national
securities exchange, pursuant to the Exchange Act, and all final prospectuses
with respect to any securities issued or to be issued by the Borrower or any of
its Subsidiaries;

     (l) as soon as possible and in any event within five days after the
occurrence of any material default under any material agreement to which the
Borrower or any of its Subsidiaries is a party, which default would materially
adversely affect the financial condition, business, results of operations or
property of the Borrower and its Subsidiaries, considered as a whole, any of
which is continuing on the date of such certificate, a certificate of the chief
financial officer of the Borrower setting forth the details of such material
default and the action which the Borrower or any such Subsidiary proposes to
take with respect thereto; and

     (m) promptly after requested, such other information respecting the
business, properties, condition or operations, financial or otherwise, of the
Borrower and its Subsidiaries as any Agent or the Required Lenders may from time
to time reasonably request in writing.

The Borrower shall be deemed to have fulfilled its obligations pursuant to
clauses (b), (c), (d), (e) and (k) above to the extent the Administrative Agent
(and the Lenders, if applicable) receives an electronic copy of the requisite
document or documents in a format acceptable to the Administrative Agent,
provided that (1) an executed, tangible copy of any report required pursuant to
clause (e) above is delivered to the Administrative Agent at the time of any
such electronic delivery, and (2) a tangible copy of each requisite document
delivered electronically is made available by the Borrower promptly upon request
by any Agent or Lender.

                                   ARTICLE IX
                                    DEFAULTS

     SECTION 9.01. EVENTS OF DEFAULT. If any of the following events (each an
"EVENT OF DEFAULT") shall occur and be continuing, the Administrative Agent and
the Lenders shall be entitled to exercise the remedies set forth in Section
9.02:

     (a) The Borrower shall fail to pay (i) any principal of any Loan when due
or (ii) any interest thereon, fees or other amounts (other than any principal of
any Loan) payable hereunder within two Business Days after such interest, fees
or other amounts shall have become due; or

     (b) Any representation or warranty made by or on behalf of the Borrower in
any Loan Document or certificate or other writing delivered pursuant thereto
shall prove to have been incorrect in any material respect when made or deemed
made; or

     (c) The Borrower or any of its Subsidiaries shall fail to perform or
observe any term or covenant on its part to be performed or observed contained
in Section 8.01(c), (h), (i), (j) or (l) or in Section 8.02 hereof (and the
Borrower, each Lender and each Agent hereby agrees that an Event of Default
under this subsection (c) shall be given effect as if the defaulting Subsidiary
were a party to this Agreement); or

     (d) The Borrower or any of its Subsidiaries shall fail to perform or
observe any other term or covenant on its part to be performed or observed
contained in any Loan Document and



                                       50
   55

any such failure shall remain unremedied, after written notice thereof shall
have been given to the Borrower by the Administrative Agent, for a period of 10
Business Days (and the Borrower, each Lender and each Agent hereby agrees that
an Event of Default under this subsection (d) shall be given effect as if the
defaulting Subsidiary were a party to this Agreement); or

     (e) The Borrower, any Restricted Subsidiary or Consumers shall fail to pay
any of its Debt (including any interest or premium thereon but excluding Debt
incurred under this Agreement) (i) aggregating, in the case of the Borrower and
each Restricted Subsidiary, $6,000,000 or more or, in the case of Consumers,
$25,000,000 or more, or (ii) arising under the Indenture or any Senior Note,
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in any agreement or instrument relating to such Debt;
or any other default under any agreement or instrument relating to any such
Debt, or any other event, shall occur and shall continue after the applicable
grace period, if any, specified in such agreement or instrument, if the effect
of such default or event is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and payable,
or required to be prepaid (other than by a regularly scheduled required
prepayment) prior to the stated maturity thereof; unless in each such case the
obligee under or holder of such Debt shall have waived in writing such
circumstance so that such circumstance is no longer continuing; or

     (f) (i) The Borrower, any Restricted Subsidiary or Consumers shall
generally not pay its debts as such debts become due, or shall admit in writing
its inability to pay its debts generally, or shall make an assignment for the
benefit of creditors; or (ii) any proceeding shall be instituted by or against
the Borrower, any Restricted Subsidiary or Consumers seeking to adjudicate it a
bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of its debts under
any law relating to bankruptcy, insolvency, or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for any substantial part
of its property and, in the case of a proceeding instituted against the
Borrower, either such proceeding shall remain undismissed or unstayed for a
period of 60 days or any of the actions sought in such proceeding (including the
entry of an order for relief against the Borrower, a Restricted Subsidiary or
Consumers or the appointment of a receiver, trustee, custodian or other similar
official for the Borrower, such Restricted Subsidiary or Consumers or any of its
property) shall occur; or (iii) the Borrower, any Restricted Subsidiary or
Consumers shall take any corporate or other action to authorize any of the
actions set forth above in this subsection (f); or

     (g) Any judgment or order for the payment of money in excess of $6,000,000
shall be rendered against the Borrower or its properties and either (i)
enforcement proceedings shall have been commenced by any creditor upon such
judgment or order or (ii) there shall be any period of 30 consecutive days
during which a stay of enforcement of such judgment or order, by reason of a
pending appeal or otherwise, shall not be in effect; or

     (h) Any material provision of any Loan Document, after execution hereof or
delivery thereof under Article VI, shall for any reason other than the express
terms hereof or thereof cease to be valid and binding on any party thereto; or
the Borrower shall so assert in writing; or


                                       51

   56


     (i) The Cash Collateral Agreement after execution and delivery thereof
under Article VI shall for any reason, except to the extent permitted by the
terms thereof or due to any failure by any Agent to take any action on its part
to be performed under applicable law in order to maintain such perfection, cease
to create a valid and perfected first priority Lien in any of the Collateral
described therein; or

     (j) At any time any Issuing Bank shall have been served with or otherwise
subjected to a court order, injunction, or other process or decree issued or
granted at the instance of the Borrower restraining or seeking to restrain such
Issuing Bank from paying any amount under any Letter of Credit issued by it and
either (i) there has been a drawing under such Letter of Credit which such
Issuing Bank would otherwise be obligated to pay or (ii) the stated expiration
date or any reduction of the stated amount of such Letter of Credit has occurred
but the right of the beneficiary to draw thereunder has been extended in
connection with the pendency of the related court action or proceeding; or

     (k) There shall be imposed or enacted any Consumers Dividend Restriction,
the result of which is that the Dividend Coverage Ratio shall be less than 1.15
to 1.0 at any time after the imposition of such Consumers Dividend Restriction.

     SECTION 9.02. REMEDIES. If any Event of Default has occurred and is
continuing, then the Administrative Agent shall at the request, or may with the
consent, of the Required Lenders, upon notice to the Borrower (i) declare the
Commitments and the obligation of each Lender to make or Convert Loans (other
than Loans under Section 4.04) and of any Issuing Bank to issue a Letter of
Credit to be terminated, whereupon the same shall forthwith terminate, (ii)
declare the principal amount outstanding hereunder, all interest thereon and all
other amounts payable under this Agreement and the other Loan Documents to be
forthwith due and payable, whereupon the principal amount outstanding hereunder,
all such interest and all such amounts shall become and be forthwith due and
payable, without presentment, demand, protest or further notice of any kind, all
of which are hereby expressly waived by the Borrower, (iii) provide from the
proceeds of any Collateral (as defined in the Cash Collateral Agreement) for
cash collateralization of LC Outstandings, and (iv) exercise in respect of any
and all collateral, in addition to the other rights and remedies provided for
herein and in the Cash Collateral Agreement or otherwise available to the
Administrative Agent or the Lenders, all the rights and remedies of a secured
party on default under the Uniform Commercial Code in effect in the State of New
York and in effect in any other jurisdiction in which collateral is located at
that time; provided, however, that in the event of an actual or deemed entry of
an order for relief with respect to the Borrower under the Federal Bankruptcy
Code, (A) the Commitments and the obligation of each Lender to make Loans and of
any Issuing Bank to issue any Letter of Credit shall automatically be terminated
and (B) the principal amount outstanding hereunder, all such interest and all
such amounts shall automatically become and be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are hereby
expressly waived by the Borrower. Notwithstanding anything to the contrary
contained herein, no notice given or declaration made by the Administrative
Agent pursuant to this Section 9.02 shall affect (i) the obligation of any
Issuing Bank to make any payment under any Letter of Credit issued by such
Issuing Bank in accordance with the terms of such Letter of Credit or (ii) the
participatory interest of each Lender in each such payment.


                                       52


   57

                                   ARTICLE X
                                   THE AGENTS

     SECTION 10.01. AUTHORIZATION AND ACTION.

     (a) Each of the Lenders and the Issuing Banks hereby irrevocably appoints
each Agent (other than the Co-Syndication Agents and Documentation Agent) as its
agent and authorizes each such Agent to take such actions on its behalf and to
exercise such powers as are delegated to such Agent by the terms of the Loan
Documents, together with such actions and powers as are reasonably incidental
thereto.

     (b) Any Lender serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the same
as though it were not an Agent, and such Lender and its Affiliates may accept
deposits from, lend money to and generally engage in any kind of business with
the Borrower or any of its Subsidiaries or other Affiliate thereof as if it were
not an Agent hereunder.

     (c) No Agent shall have any duties or obligations except those expressly
set forth in the Loan Documents. Without limiting the generality of the
foregoing, (i) no Agent shall be subject to any fiduciary or other implied
duties, regardless of whether a Default or an Event of Default has occurred and
is continuing, (ii) no Agent shall have any duty to take any discretionary
action or exercise any discretionary powers, except discretionary rights and
powers expressly contemplated by the Loan Documents that such Agent is required
to exercise in writing by the Required Lenders (or such other number or
percentage of the Lenders as shall be necessary under the circumstances as
provided in Section 11.01), and (iii) except as expressly set forth in the Loan
Documents, no Agent shall have any duty to disclose, or shall be liable for the
failure to disclose, any information relating to the Borrower or any of its
Subsidiaries or Affiliates that is communicated to or obtained by the Lender
serving as such Agent or any of its Affiliates in any capacity. No Agent shall
be liable for any action taken or not taken by it with the consent or at the
request of the Required Lenders (or such other number or percentage of the
Lenders as shall be necessary under the circumstances as provided in Section
11.01 or any other provision of this Agreement) or in the absence of its own
gross negligence or willful misconduct. Each Agent shall be deemed not to have
knowledge of any Default or Event of Default unless and until written notice
thereof is given to such Agent by the Borrower or a Lender (in which case such
Agent shall promptly give a copy of such written notice to the Lenders and the
other Agents). No Agent shall be responsible for or have any duty to ascertain
or inquire into (A) any statement, warranty or representation made in or in
connection with any Loan Document, (B) the contents of any certificate, report
or other document delivered thereunder or in connection therewith, (C) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document, (D) the validity, enforceability,
effectiveness or genuineness of any Loan Document or any other agreement,
instrument or document, or (E) the satisfaction of any condition set forth in
Article VI or elsewhere in any Loan Document, other than to confirm receipt of
items expressly required to be delivered to such Agent. Neither any
Co-Syndication Agent nor the Documentation Agent shall have any duties or
obligations in such capacity under any of the Loan Documents.



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     (d) Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. Each Agent also may rely
upon any statement made to it orally or by telephone and believed by it to be
made by the proper Person, and shall not incur any liability for relying
thereon. Each Agent may consult with legal counsel (who may be counsel for the
Borrower), independent accountants and other experts selected by it, and shall
not be liable for any action taken or not taken by it in accordance with the
advice of any such counsel, accountants or experts.

     (e) Each Agent may perform any and all its duties and exercise its rights
and powers by or through one or more sub-agents appointed by such Agent. Each
Agent and any such sub-agent may perform any and all its duties and exercise its
rights and powers through their respective Related Parties. The exculpatory
provisions of the preceding subsections of this Section 10.01 shall apply to any
such sub-agent and to the Related Parties of each Agent and any such sub-agent,
and shall apply to their respective activities in connection with the
syndication of the credit facilities provided for herein as well as activities
as an Agent.

     (f) Subject to the appointment and acceptance of a successor Agent as
provided in this subsection (f), any Agent may resign at any time by notifying
the Lenders, the Issuing Bank and the Borrower. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Borrower, to
appoint a successor. If no successor shall have been so appointed by the
Required Lenders and shall have accepted such appointment within 30 days after
the retiring Agent gives notice of its resignation, then the retiring Agent may,
on behalf of the Lenders and the Issuing Bank, appoint a successor Agent which
shall be a Lender with an office in New York, New York, or an Affiliate of any
such Lender. Upon the acceptance of its appointment as an Agent hereunder by a
successor, such successor shall succeed to and become vested with all the
rights, powers, privileges and duties of the retiring Agent, and the retiring
Agent shall be discharged from its duties and obligations hereunder. The fees
payable by the Borrower to a successor Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrower and such
successor. After an Agent's resignation hereunder, the provisions of this
Article and Section 11.04 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Related Parties in respect
of any actions taken or omitted to be taken by any of them while it was acting
as an Agent.

     (g) Each Lender acknowledges that it has independently and without reliance
upon any Agent or any other Lender and based on such documents and information
as it has deemed appropriate, made its own credit analysis and decision to enter
into this Agreement. Each Lender also acknowledges that it will, independently
and without reliance upon any Agent or any other Lender and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement, any other Loan Document or any related agreement or any
document furnished hereunder or thereunder.

     SECTION 10.02. INDEMNIFICATION. The Lenders agree to indemnify each Agent
(to the extent not reimbursed by the Borrower), ratably according to the
respective Percentages of the Lenders, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever which may



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be imposed on, incurred by, or asserted against such Agent in any way relating
to or arising out of this Agreement or any action taken or omitted by such Agent
under this Agreement, provided that no Lender shall be liable for any portion of
such liabilities, obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting from such Agent's gross
negligence or willful misconduct. Without limitation of the foregoing, each
Lender agrees to reimburse the Agents and the Arranger promptly upon demand for
its ratable share of any out-of-pocket expenses (including counsel fees)
incurred by the Agents in connection with the preparation, syndication,
execution, delivery, administration, modification, amendment or enforcement
(whether through negotiations, legal proceedings or otherwise) of, or legal
advice in respect of rights or responsibilities under, this Agreement to the
extent that the Agents are entitled to reimbursement for such expenses pursuant
to Section 11.04 but are not reimbursed for such expenses by the Borrower.

                                   ARTICLE XI
                                  MISCELLANEOUS

     SECTION 11.01. AMENDMENTS, ETC. No amendment or waiver of any provision of
any Loan Document, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Required Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders, do any of the following: (i) waive, modify or
eliminate any of the conditions specified in Article VI, (ii) increase the
Commitments of the Lenders that may be maintained hereunder or subject the
Lenders to any additional obligations, (iii) reduce the principal of, or
interest on, any Loan, any Applicable Margin or any fees or other amounts
payable hereunder (other than fees payable to the Administrative Agent pursuant
to Section 2.02(c)), (iv) postpone any date fixed for any payment of principal
of, or interest on, any Loan or any fees or other amounts payable hereunder
(other than fees payable to the Administrative Agent pursuant to Section
2.02(c)), (v) change the definition of "Required Lenders" contained in Section
1.01 or change any other provision that specifies the percentage of the
Commitments or of the aggregate unpaid principal amount of the Loans or the
number of Lenders which shall be required for the Lenders or any of them to take
any action hereunder, (vi) amend any Loan Document in a manner intended to
prefer one or more Lenders over any other Lenders, (vii) amend, waive or modify
Section 2.03(b) or this Section 11.01, (viii) release any collateral or change
any provision of the Cash Collateral Agreement providing for the release of
Collateral, or (ix) extend the Termination Date; and provided, further, that no
amendment, waiver or consent shall, unless in writing and signed by each Agent
in addition to the Lenders required above to take such action, affect the rights
or duties of any Agent under this Agreement or any other Loan Document; and
provided, further, that no amendment, waiver or consent shall, unless in writing
and signed by each Issuing Bank in addition to the Lenders required above to
take such action, affect the rights or duties of any Issuing Bank under this
Agreement or any other Loan Document. Any request from the Borrower for any
amendment, waiver or consent under this Section 11.01 shall be addressed to the
Administrative Agent.

     SECTION 11.02. NOTICES, ETC. All notices and other communications provided
for hereunder and under the other Loan Documents shall be in writing (including
telegraphic, facsimile, telex or cable communication) and mailed, telegraphed,
telecopied, telexed, cabled or



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delivered, (i) if to the Borrower, at its address at Fairlane Plaza South, 330
Town Center Drive, Suite 1100, Dearborn, Michigan 48126, Attention: Rodger A.
Kershner, Esq., General Counsel, with a copy to Laura L. Mountcastle, Vice
President, Investor Relations and Treasurer, 330 Town Center Drive, Suite 1100,
Dearborn, Michigan 48126; (ii) if to any Bank, at its Domestic Lending Office
specified opposite its name on Schedule I; (iii) if to any Issuing Bank, at its
address specified in the Issuing Bank Agreement to which it is a party; (iv) if
to any Lender other than a Bank, at its Domestic Lending Office specified in the
Lender Assignment pursuant to which it became a Lender; and (v) if to the
Administrative Agent or the Collateral Agent, at its address at Agent Bank
Services Group, 1 Chase Manhattan Plaza, 8th Floor, New York, New York 10081,
Attention: Michael Cerniglia (Telecopy no. 212.552.5777), with a copy to The
Chase Manhattan Bank, 270 Park Avenue, 23rd Floor, New York, New York 10017,
Attention: Thomas L. Casey (Telecopy No. 212.270.3089); or, as to each party, at
such other address as shall be designated by such party in a written notice to
the other parties. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective five days after when
deposited in the mails, or when delivered to the telegraph company, telecopied,
confirmed by telex answerback or delivered to the cable company, respectively,
except that notices and communications to any Agent pursuant to Article II, III,
or X shall not be effective until received by such Agent.

     SECTION 11.03. NO WAIVER OF REMEDIES. No failure on the part of the
Borrower, any Lender, any Issuing Bank or any Agent to exercise, and no delay in
exercising, any right hereunder or under any other Loan Document shall operate
as a waiver thereof; nor shall any single or partial exercise of any such right
preclude any other or further exercise thereof or the exercise of any other
right. The remedies herein provided are cumulative and not exclusive of any
remedies provided by law.

     SECTION 11.04. COSTS, EXPENSES AND INDEMNIFICATION.

     (a) The Borrower agrees to (i) reimburse on demand all reasonable costs and
expenses of each Agent and the Arranger (including reasonable fees and expenses
of counsel to the Agents) in connection with (A) the preparation, syndication,
negotiation, execution and delivery of the Loan Documents and (B) the care and
custody of any and all collateral, and any proposed modification, amendment, or
consent relating to any Loan Document, and (ii) to pay on demand all reasonable
costs and expenses of each Agent and, on and after the date upon which the
principal amount outstanding hereunder becomes or is declared to be due and
payable pursuant to Section 9.02 or an Event of Default specified in Section
9.01(a) shall have occurred and be continuing, each Lender (including reasonable
fees and expenses of counsel to the Agents, special Michigan counsel to the
Lenders and, from and after such date, counsel for each Lender (including the
allocated costs and expenses of in-house counsel)) in connection with the
workout, restructuring or enforcement (whether through negotiations, legal
proceedings or otherwise) of this Agreement, the other Loan Documents and the
other documents to be delivered hereunder.

     (b) The Borrower shall indemnify each Agent, the Arranger, the Issuing
Bank, each Lender, and each Related Party of any of the foregoing Persons (each
such Person being called an "INDEMNIFIED PERSON") against, and hold each
Indemnified Person harmless from, any and all losses, claims, damages,
liabilities and related expenses, including the reasonable fees, charges


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and disbursements of any counsel for any Indemnified Person, incurred by or
asserted against any Indemnified Person arising out of, in connection with, or
as a result of (i) the execution or delivery of any Loan Document or any other
agreement or instrument contemplated hereby or thereby, the performance by the
parties to the Loan Documents of their respective obligations thereunder or the
consummation of the transactions contemplated hereby or thereby, (ii) any Loan,
Letter of Credit or other Extension of Credit or the use or proposed use of the
proceeds therefrom (including any refusal by the Issuing Bank to honor a demand
for payment under a Letter of Credit if the documents presented in connection
with such demand do not strictly comply with the terms of such Letter of
Credit), (iii) any actual or alleged presence or release of any Hazardous
Substance on or from any property owned or operated by the Borrower or any of
its Subsidiaries, or any Environmental Liability related in any way to the
Borrower or any of its Subsidiaries, or (iv) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnified Person is a party thereto; provided that such indemnity shall
not, as to any Indemnified Person, be available to the extent that such losses,
claims, damages, liabilities or related expenses are determined by a court of
competent jurisdiction by final and nonappealable judgment to have resulted from
the gross negligence or willful misconduct of such Indemnified Person.

     (c) The Borrower's other obligations under this Section 11.04 shall survive
the repayment of all amounts owing to the Lenders, the Issuing Banks and the
Agents under the Loan Documents and the termination of the Commitments. If and
to the extent that the obligations of the Borrower under this Section 11.04 are
unenforceable for any reason, the Borrower agrees to make the maximum
contribution to the payment and satisfaction thereof which is permissible under
applicable law.

     SECTION 11.05. RIGHT OF SET-OFF.

     (a) Upon (i) the occurrence and during the continuance of any Event of
Default and (ii) the making of the request or the granting of the consent
specified by Section 9.02 to authorize the Administrative Agent to declare the
principal amount outstanding hereunder to be due and payable pursuant to the
provisions of Section 9.02, each Lender and Issuing Bank is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by such Lender or Issuing Bank to or for the credit or the account of the
Borrower, against any and all of the obligations of the Borrower now or
hereafter existing under this Agreement and the Promissory Notes held by such
Lender or the Issuing Bank Agreement to which such Issuing Bank is a party, as
the case may be, irrespective of whether or not such Lender or Issuing Bank
shall have made any demand under this Agreement, such Promissory Notes or such
Issuing Bank Agreement, as the case may be, and although such obligations may be
unmatured. Each Lender and Issuing Bank agrees to notify promptly the Borrower
after any such set-off and application made by such Lender or Issuing Bank,
provided that the failure to give such notice shall not affect the validity of
such set-off and application. The rights of each Lender and Issuing Bank under
this Section 11.05 are in addition to other rights and remedies (including other
rights of set-off) which such Lender and Issuing Bank may have.


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     (b) The Borrower agrees that it shall have no right of off-set, deduction
or counterclaim in respect of its obligations hereunder, and that the
obligations of the Lenders hereunder are several and not joint. Nothing
contained herein shall constitute a relinquishment or waiver of the Borrower's
rights to any independent claim that the Borrower may have against any Agent or
any Lender for such Agent's or such Lender's, as the case may be, gross
negligence or willful misconduct, but no Lender shall be liable for any such
conduct on the part of any Agent or any other Lender, and no Agent shall be
liable for any such conduct on the part of any Lender.

     SECTION 11.06. BINDING EFFECT. This Agreement shall become effective when
it shall have been executed by the Borrower and the Agents and when the
Administrative Agent shall have been notified by each Bank that such Bank has
executed it and thereafter shall be binding upon and inure to the benefit of the
Borrower, the Agents and each Lender and their respective successors and
assigns, except that the Borrower shall not have the right to assign its rights
hereunder or any interest herein without the prior written consent of the
Lenders.

     SECTION 11.07. ASSIGNMENTS AND PARTICIPATION.

     (a) Each Lender may, with the consent of the Borrower and the
Administrative Agent (such consent not to be unreasonably withheld or delayed
and, in the case of the Borrower, shall not be required if an Event of Default
has occurred and is continuing), assign to one or more banks or other entities
all or a portion of its rights and obligations under this Agreement and the
other Loan Documents (including all or a portion of its Commitment, the Loans
owing to it and any Promissory Notes held by it); provided, however, that (i)
each such assignment shall be of a constant, and not a varying, percentage of
all of the assigning Lender's rights and obligations under this Agreement, (ii)
the amount of the Commitment of the assigning Lender being assigned pursuant to
each such assignment (determined as of the date of the Lender Assignment with
respect to such assignment) shall in no event be less than the lesser of the
amount of such Lender's Commitment and $10,000,000 and shall be an integral
multiple of $5,000,000, (iii) each such assignment shall be to an Eligible
Assignee, and (iv) the parties to each such assignment shall execute and deliver
to the Administrative Agent, for its acceptance and recording in the Register, a
Lender Assignment, together with any Promissory Notes subject to such
assignment, an Administrative Questionnaire and a processing and recordation fee
of $3,500; and provided further, however, that the consent of the Borrower and
the Administrative Agent shall not be required for any assignments by a Lender
to any of its Affiliates or to any other Lender or any of its Affiliates. Upon
such execution, delivery, acceptance and recording, from and after the effective
date specified in each Lender Assignment, which effective date shall be at least
five Business Days after the execution thereof, (A) the assignee thereunder
shall be a party hereto and, to the extent that rights and obligations hereunder
have been assigned to it pursuant to such Lender Assignment, have the rights and
obligations of a Lender hereunder and (B) the Lender assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it to
an Eligible Assignee pursuant to such Lender Assignment, relinquish its rights
and be released from its obligations under this Agreement (and, in the case of a
Lender Assignment covering all or the remaining portion of an assigning Lender's
rights and obligations under this Agreement, such Lender shall cease to be a
party hereto); provided, however, that the limitation set forth in clause (iv),
above, shall not apply if an Event of Default shall have occurred and be
continuing and the Administrative Agent shall have declared all Loans to be, or



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all Loans shall have automatically become, immediately due and payable
hereunder. The Administrative Agent agrees to give prompt notice to the Lenders
and the Borrower of any assignment or participation of its rights and
obligations as a Bank hereunder. Notwithstanding anything to the contrary
contained in this Agreement, any Lender may at any time assign all or any
portion of the Loans owing to it to any Affiliate of such Lender. The assigning
Lender shall promptly notify the Borrower of any such assignment. No such
assignment, other than to an Eligible Assignee, shall release the assigning
Lender from its obligations hereunder.

     (b) By executing and delivering a Lender Assignment, the Lender assignor
thereunder and the assignee thereunder confirm to and agree with each other and
the other parties hereto as follows: (i) other than as provided in such Lender
Assignment, such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to any statements, warranties or
representations made in or in connection with any Loan Document or the
execution, legality, validity, enforceability, genuineness, sufficiency or value
of any Loan Document or any other instrument or document furnished pursuant
thereto; (ii) such assigning Lender makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Borrower or the performance or observance by the Borrower of any of its
obligations under any Loan Document or any other instrument or document
furnished pursuant thereto; (iii) such assignee confirms that it has received a
copy of each Loan Document, together with copies of the financial statements
referred to in Section 7.01(e) and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into such Lender Assignment; (iv) such assignee will, independently and without
reliance upon the Agents, such assigning Lender or any other Lender and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
the Loan Documents; (v) such assignee confirms that it is an Eligible Assignee
(unless an Event of Default shall have occurred and be continuing and the
Administrative Agent shall have declared all Loans to be immediately due and
payable hereunder, in which case no such confirmation is necessary); (vi) such
assignee appoints and authorizes each Agent to take such action as agent on its
behalf and to exercise such powers under the Loan Documents as are delegated to
each Agent by the terms thereof, together with such powers as are reasonably
incidental thereto; and (vii) such assignee agrees that it will perform in
accordance with their terms all of the obligations which by the terms of the
Loan Documents are required to be performed by it as a Lender.

     (c) The Administrative Agent shall maintain at its address referred to in
Section 11.02 a copy of each Lender Assignment delivered to and accepted by it
and a register for the recordation of the names and addresses of the Lenders and
the Commitment of, and principal amount of the Loans owing to, each Lender from
time to time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and the Borrower, the
Agents, the Issuing Banks and the Lenders may treat each Person whose name is
recorded in the Register as a Lender hereunder for all purposes of this
Agreement. The Register shall be available for inspection by the Borrower, any
Issuing Bank or any Lender at any reasonable time and from time to time upon
reasonable prior notice.

     (d) Upon its receipt of a Lender Assignment executed by an assigning Lender
and an assignee representing that it is an Eligible Assignee, together with the
assignee's completed Administrative Questionnaire (unless the assignee shall
already be a Lender hereunder), any

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Promissory Notes subject to such assignment, the processing and recordation fee
referred to in subsection (a) above and any written consent to such assignment
required by subsection (a) above, the Administrative Agent shall, if such Lender
Assignment has been completed and is in substantially the form of Exhibit G, (i)
accept such Lender Assignment, (ii) record the information contained therein in
the Register and (iii) give prompt notice thereof to the Borrower. New and/or
replacement Promissory Notes payable to the assignee and the assigning Lender
(if the assigning Lender assigned less than all of its rights and obligations
hereunder) shall be issued upon request pursuant to Section 3.01(d), and shall
be dated the effective date of such Lender Assignment.

     (e) Each Lender may sell participations to one or more banks or other
entities (a "PARTICIPANT") in or to all or a portion of its rights and/or
obligations under the Loan Documents (including all or a portion of its
Commitment, the Loans owing to it and any Promissory Notes held by it);
provided, however, that (i) such Lender's obligations under this Agreement
(including its Commitment to the Borrower hereunder) shall remain unchanged,
(ii) such Lender shall remain solely responsible to the other parties hereto for
the performance of such obligations, (iii) such Lender shall remain the holder
of any such Promissory Notes for all purposes of this Agreement, and (iv) the
Borrower, the Agents, the Issuing Banks and the other Lenders shall continue to
deal solely and directly with such Lender in connection with such Lender's
rights and obligations under this Agreement. Any agreement or instrument
pursuant to which a Lender sells such a participation shall provide that such
Lender shall retain the sole right to enforce this Agreement and the other Loan
Documents and to approve any amendment, modification or waiver of any provision
of this Agreement or any other Loan Document; provided, that such agreement or
instrument may provide that such Lender will not, without the consent of the
Participant, agree to any amendment, modification or waiver described in the
first proviso to Section 11.01 that affects such Participant. Subject to
subsection (f) below, the Borrower agrees that each Participant shall be
entitled to the benefits of Sections 5.04 and 5.06 to the same extent as if it
were a Lender and had acquired its interest by assignment pursuant to subsection
(a) above. To the extent permitted by law, each Participant shall also be
entitled to the benefits of Section 11.05(a) as though it were a Lender,
provided such Participant agrees to be subject to Section 5.05 as though it were
a Lender.

     (f) A Participant shall not be entitled to receive any greater payment
under Section 5.04 or 5.06 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrower's
prior written consent. A Participant that would be a Foreign Lender if it were a
Lender shall not be entitled to the benefits of Section 5.06 unless the Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of the Borrower, to comply with Section 5.06(e) as
though it were a Lender.

     (g) Any Lender may, in connection with any assignment or participation or
proposed assignment or participation pursuant to this Section 11.07, disclose to
the assignee or Participant or proposed assignee or Participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee or
Participant or proposed assignee or Participant shall agree, in accordance with
the terms of Section 11.08, to preserve the confidentiality of any Confidential
Information received by it from such Lender.




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     (h) If any Lender (or any Participant to which such Lender has sold a
participation) shall make any demand for payment under Section 5.04(a) or (c),
then in the case of any such demand, within 30 days after any such demand (if,
but only if, such demanded payment has been made by the Borrower) or notice, the
Borrower may, with the approval of the Administrative Agent (which approval
shall not be unreasonably withheld) and provided that no Event of Default or
Default shall then have occurred and be continuing, demand that such Lender
assign, at the sole cost and expense of the Borrower, in accordance with this
Section 11.07 to one or more Eligible Assignees designated by the Borrower, all
(but not less than all) of such Lender's Commitment and the Loans owing to it
within the period ending on the later to occur of (x) the last day in the period
described above, as applicable, and (y) the last day of the longest of the then
current Interest Periods for such Loans. If any such Eligible Assignee
designated by the Borrower shall fail to consummate such assignment on terms
acceptable to such Lender, or if the Borrower shall fail to designate any such
Eligible Assignees for all or part of such Lender's Commitment or Loans, then
such demand by the Borrower shall become ineffective; it being understood for
purposes of this subsection (h) that such assignment shall be conclusively
deemed to be on terms acceptable to such Lender, and such Lender shall be
compelled to consummate such assignment to an Eligible Assignee designated by
the Borrower, if such Eligible Assignee (1) shall agree to such assignment by
entering into a Lender Assignment with such Lender and (2) shall offer
compensation to such Lender in an amount equal to all amounts then owing by the
Borrower to such Lender hereunder and under any Promissory Notes made by the
Borrower to such Lender, whether for principal, interest, fees, costs or
expenses (other than the demanded payment referred to above, and payable by the
Borrower as a condition to the Borrower's right to demand such assignment) or
otherwise (including, without limitation, to the extent not paid by the
Borrower, any payments required pursuant to Section 5.04(b)). In addition, in
the case of any amount demanded for payment by any Lender (or such Participant)
pursuant to Section 5.04(a) or (c), the Borrower may, in the case of any such
Lender, with the approval of the Administrative Agent (which approval shall not
be unreasonably withheld) and provided that no Event of Default or Default shall
then have occurred and be continuing, terminate all (but not less than all) such
Lender's Commitment and prepay all (but not less than all) such Lender's Loans
not so assigned, together with all interest accrued thereon to the date of such
prepayment and all fees, costs and expenses and other amounts then owing by the
Borrower to such Lender hereunder and under any Promissory Notes made by the
Borrower to such Lender, at any time from and after such later occurring day in
accordance with Sections 2.03 and 5.03 (but without the requirement stated
therein for ratable treatment of the other Lenders), if and only if, after
giving effect to such termination and prepayment, the sum of the aggregate
principal amount of the Loans of all Lenders then outstanding does not exceed
the then remaining Commitments of the Lenders. Notwithstanding anything set
forth above in this subsection (h) to the contrary, the Borrower shall not be
entitled to compel the assignment by any Lender demanding payment under Section
5.04(a) of its Commitment and Loans or terminate and prepay the Commitment and
Loans of such Lender if, prior to or promptly following any such demand by the
Borrower, such Lender shall have changed or shall change, as the case may be,
its Applicable Lending Office for its Eurodollar Rate Loans so as to eliminate
the further incurrence of such increased cost. In furtherance of the foregoing,
any such Lender demanding payment or giving notice as provided above agrees to
use reasonable efforts to so change its Applicable Lending Office if, to do so,
would not result in the incurrence by such Lender of additional costs or
expenses which it deems


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material or, in the sole judgment of such Lender, be inadvisable for regulatory,
competitive or internal management reasons.

     (i) Anything in this Section 11.07 to the contrary notwithstanding, any
Lender may assign and pledge all or any portion of its Commitment and the Loans
owing to it to any Federal Reserve Bank (and its transferees) as collateral
security pursuant to Regulation A of the Board and any Operating Circular issued
by such Federal Reserve Bank. No such assignment shall release the assigning
Lender from its obligations hereunder.

     SECTION 11.08. CONFIDENTIALITY. In connection with the negotiation and
administration of this Agreement and the other Loan Documents, the Borrower has
furnished and will from time to time furnish to the Agents, the Issuing Banks
and the Lenders (each, a "RECIPIENT") written information which is identified to
the Recipient when delivered as confidential (such information, other than any
such information which (i) was publicly available, or otherwise known to the
Recipient, at the time of disclosure, (ii) subsequently becomes publicly
available other than through any act or omission by the Recipient or (iii)
otherwise subsequently becomes known to the Recipient other than through a
Person whom the Recipient knows to be acting in violation of his or its
obligations to the Borrower, being hereinafter referred to as "CONFIDENTIAL
INFORMATION"). The Recipient will not knowingly disclose any such Confidential
Information to any third party (other than to those persons who have a
confidential relationship with the Recipient), and will take all reasonable
steps to restrict access to such information in a manner designed to maintain
the confidential nature of such information, in each case until such time as the
same ceases to be Confidential Information or as the Borrower may otherwise
instruct. It is understood, however, that the foregoing will not restrict the
Recipient's ability to freely exchange such Confidential Information with its
Affiliates or with prospective participants in or assignees of the Recipient's
position herein, but the Recipient's ability to so exchange Confidential
Information shall be conditioned upon any such Affiliate's or prospective
participant's (as the case may be) entering into an agreement as to
confidentiality similar to this Section 11.08. It is further understood that the
foregoing will not prohibit the disclosure of any or all Confidential
Information if and to the extent that such disclosure may be required (1) by a
regulatory agency or otherwise in connection with an examination of the
Recipient's records by appropriate authorities, (2) pursuant to court order,
subpoena or other legal process or (3) otherwise, as required by law; in the
event of any required disclosure under clause (2) or (3), above, the Recipient
agrees to use reasonable efforts to inform the Borrower as promptly as
practicable to the extent not prohibited by law.

     SECTION 11.09. Waiver of Jury Trial. THE BORROWER, THE AGENTS, THE ISSUING
BANKS AND THE LENDERS EACH HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY OTHER INSTRUMENT OR DOCUMENT
DELIVERED HEREUNDER OR THEREUNDER.

     SECTION 11.10. GOVERNING LAW; SUBMISSION TO JURISDICTION. This Agreement
and the Promissory Notes shall be governed by, and construed in accordance with,
the laws of the State of New York (including Section 5-1401 of the General
Obligations Laws of the State of New York, but otherwise without regard to
conflicts of law principles). The Borrower, the Lenders,



                                       62

   67


the Issuing Banks and the Agents, each (i) irrevocably submits to the
jurisdiction of any New York State court or Federal court sitting in New York
City in any action arising out of any Loan Document, (ii) agrees that all claims
in such action may be decided in such court, (iii) waives, to the fullest extent
it may effectively do so, the defense of an inconvenient forum and (iv) consents
to the service of process by mail. A final judgment in any such action shall be
conclusive and may be enforced in other jurisdictions. Nothing herein shall
affect the right of any party to serve legal process in any manner permitted by
law or affect its right to bring any action in any other court.

     SECTION 11.11. RELATION OF THE PARTIES; NO BENEFICIARY. No term, provision
or requirement, whether express or implied, of any Loan Document, or actions
taken or to be taken by any party thereunder, shall be construed to create a
partnership, association, or joint venture between such parties or any of them.
No term or provision of the Loan Documents shall be construed to confer a
benefit upon, or grant a right or privilege to, any Person other than the
parties hereto. The Borrower hereby acknowledges that neither any Agent nor any
Lender has any fiduciary relationship with or fiduciary duty to the Borrower
arising out of or in connection with this Agreement or any of the other Loan
Documents, and the relationship between the Agents and the Lenders, on the one
hand, and the Borrower, on the other hand, in connection herewith or therewith
is solely that of debtor and creditor.

     SECTION 11.12. EXISTING BANKS' WAIVER, ACKNOWLEDGMENT AND RELEASE. The
Existing Banks hereby waive compliance by the Borrower with the requirement
contained in Section 5.03(b) of the Existing Credit Agreement for the Borrower
to provide, upon the termination in full of the "Commitments" under the Existing
Credit Agreement on the date hereof, cash collateral to secure LC Outstandings
with respect to the Existing Letters of Credit. The Lenders and each Issuing
Bank acknowledge and agree that each Existing Letter of Credit shall constitute
a Letter of Credit for all purposes under this Agreement. In addition, the
Existing Banks hereby release their Lien on all of the Collateral (as defined in
the "Cash Collateral Agreement" referred to in the Existing Credit Agreement),
if any, and direct the "Collateral Agent" (as defined in the Existing Credit
Agreement) to return all such Collateral to the Borrower. Furthermore, the
Existing Banks hereby waive the five Business Days' notice requirement for
termination of the "Commitments" (as defined in the Existing Credit Agreement)
under Section 2.03(a) of the Existing Credit Agreement.

     SECTION 11.13. EXECUTION IN COUNTERPARTS. This Agreement may be executed in
any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same Agreement.

     SECTION 11.14. SURVIVAL OF AGREEMENT. All covenants, agreements,
representations and warranties made herein and in the certificates pursuant
hereto shall be considered to have been relied upon by the Agents and the
Lenders and shall survive the making by the Lenders of the Extensions of Credit
and the execution and delivery to the Lenders of any Promissory Notes evidencing
the Extensions of Credit and shall continue in full force and effect so long as
any Promissory Note or any amount due hereunder is outstanding and unpaid or any
Commitment of any Lender has not been terminated.


                                       63

   68



     IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be
executed by their respective officers thereunto duly authorized,  as of the date
first above written.

                                    CMS ENERGY CORPORATION


                                    By: /s/ Alan M. Wright
                                        ----------------------------------------
                                        Name:  Alan M. Wright
                                        Title: Senior Vice President &
                                               Chief Vice President



Commitment:                         THE CHASE MANHATTAN BANK, individually as
$88,500,000                           a Lender, and as Administrative Agent and
                                      Collateral Agent


                                    By: /s/ Thomas L. Casey
                                        ----------------------------------------
                                        Name:  Thomas L. Casey
                                        Title: Vice President


Commitment:                         BANK OF AMERICA, N.A., individually as
$82,500,000                           a Lender and as Co-Syndication Agent


                                    By: /s/ Gretchen P. Burud
                                        ----------------------------------------
                                        Name: Gretchen P. Burud
                                        Title: Principal


Commitment:                         BARCLAYS BANK PLC, individually as
$82,500,000                           a Lender, and as Co-Syndication Agent


                                    By: /s/ Sydney G. Dennis
                                        ----------------------------------------
                                        Name: Sydney G. Dennis
                                        Title: Director


Commitment:                         CITIBANK, N.A., individually as
$82,500,000                           a Lender and as Documentation Agent


                                    By: /s/ Cecilia Leyden
                                        ----------------------------------------
                                        Name: Cecilia Leyden
                                        Title: Vice President


Commitment:                         BANK ONE, N.A.
$70,000,000


                                    By: /s/ Jane A. Bek
                                        ----------------------------------------
                                        Name: Jane A. Bek
                                        Title: Vice President


Commitment:                         BNP PARIBAS
$70,000,000


                                    By: /s/ Dan Cozine
                                        ----------------------------------------
                                        Name: Dan Cozine
                                        Title: Managing Director


                                    By: /s/ Andrew S. Platt
                                        ----------------------------------------
                                        Name: Andrew S. Platt
                                        Title: Vice President



Commitment:                         UNION BANK OF CALIFORNIA, N.A.
$70,000,000


                                    By: /s/ Jason DiNafoli
                                        ----------------------------------------
                                        Name: Jason DiNafoli
                                        Title: Vice President





Commitment:                         THE BANK OF NOVA SCOTIA
$48,500,000


                                    By: /s/ F.C.H. Ashby
                                        ----------------------------------------
                                        Name: F.C.H. Ashby
                                        Title: Senior Manager - Loan Operations



Commitment:                         COMERICA BANK
$48,500,000


                                    By: /s/ Dan M. Roman
                                        ----------------------------------------
                                        Name: Dan M. Roman
                                        Title: First Vice President



Commitment:                         NATIONAL AUSTRALIA BANK, NEW YORK
$48,500,000                           BRANCH


                                    By: /s/ Paul R. Morrision
                                        ----------------------------------------
                                        Name: Paul R. Morrision
                                        Title: Vice President


Commitment:                         THE SUMITOMO BANK, LIMITED
$48,500,000


                                    By: /s/ John H. Kemper
                                        ----------------------------------------
                                        Name: John H. Kemper
                                        Title: Senior Vice President



Commitment:                         AUSTRALIA AND NEW ZEALAND BANKING
$25,000,000                           GROUP LIMITED


                                    By: /s/ Elizabeth M. Waters
                                        ----------------------------------------
                                        Name: Elizabeth M. Waters
                                        Title: Vice President



Commitment:                         BANK OF MONTREAL
$25,000,000


                                    By: /s/ Kreston M. Bjornsson
                                        ----------------------------------------
                                        Name: Kreston M. Bjornsson
                                        Title: Director



Commitment:                         CANADIAN IMPERIAL BANK OF COMMERCE
$25,000,000


                                    By: /s/ Sanjeeva Senanayake
                                        ----------------------------------------
                                        Name: Sanjeeva Senanayake
                                        Title: Executive Director



Commitment:                         DRESDNER BANK AG, NEW YORK AND GRAND
$25,000,000                           CAYMAN BRANCHES


                                    By: /s/ Adrew Schroeder
                                        ----------------------------------------
                                        Name: Adrew Schroeder
                                        Title: Assistant Vice President


                                    By: /s/ Wendy C.H. Astell
                                        ----------------------------------------
                                        Name: Wendy C.H. Astell
                                        Title: Assistant Vice President








Commitment:                         FLEET NATIONAL BANK
$25,000,000


                                    By: /s/ RITA M. CAHILL
                                        ----------------------------------------
                                        Name: Rita M. Cahill
                                        Title: Managing Director



Commitment:                         THE FUJI BANK, LIMITED
$25,000,000


                                    By: /s/ Peter L. Chinnici
                                        ----------------------------------------
                                        Name: Peter L. Chinnici
                                        Title: Senior Vice President &
                                               Group Head



Commitment:                         THE ROYAL BANK OF SCOTLAND PLC
$25,000,000


                                    By: /s/ Jayne Seaford
                                        ----------------------------------------
                                        Name: Jayne Seaford
                                        Title: Vice President



Commitment:                         SOCIETE GENERALE, CHICAGO BRANCH
$25,000,000


                                    By: /s/ Jose A. Moreno
                                        ----------------------------------------
                                        Name: Jose A. Moreno
                                        Title: Director



Commitment:                         THE MITSUBISHI TRUST AND BANKING
$20,000,000                           CORPORATION, NEW YORK BRANCH


                                    By: /s/ Akihito Watanabe
                                        ----------------------------------------
                                        Name: Akihito Watanabe
                                        Title: Vice President



Commitment:                         CHANG HWA COMMERCIAL BANK, LTD.,
$15,000,000                           NEW YORK BRANCH


                                    By: /s/ Wan-Tu Yeh
                                        ----------------------------------------
                                        Name: Wan-Tu Yeh
                                        Title: Vice President & General Manager



Commitment:                         FIRST COMMERCIAL BANK (INCORPORATED IN
$15,000,000                           TAIWAN, R.O.C.), LOS ANGELES BRANCH


                                    By: /s/ June-Shiong Lu
                                        ----------------------------------------
                                        Name: June-Shiong Lu
                                        Title: Senior Vice President &
                                               General Manager



Commitment:                         NATIONAL CITY BANK
$10,000,000


                                        By: /s/ Kenneth R. Ehrhardt
                                            ------------------------------------
                                            Name: Kenneth R. Ehrhardt
                                            Title: Senior Vice President


   69
                                                                       EXHIBIT A


                           FORM OF NOTICE OF BORROWING


                                     [Date]

The Chase Manhattan Bank, as Administrative
  Agent for the Lenders parties to the
  Credit Agreement referred to below

Attention:        Michael Cerniglia

Ladies and Gentlemen:

     The undersigned, CMS Energy Corporation, refers to the Credit Agreement,
dated as of June 27, 2000 (as amended, modified or supplemented from time to
time, the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined), among the Borrower, the
Lenders named therein, The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent, Bank of America, N.A. and Barclays Bank plc, as Co-Syndication
Agents, and Citibank, N.A. as Documentation Agent, and hereby gives you notice,
irrevocably, pursuant to Section 3.01 of the Credit Agreement that the
undersigned hereby requests a Borrowing under the Credit Agreement, and in that
connection sets forth below the information relating to such Borrowing (the
"PROPOSED BORROWING") as required by Section 3.01(a) of the Credit Agreement:

     (i) The Business Day of the Proposed Borrowing is ________ __, 20__.

     (ii) The Type of Loans comprising the Proposed Borrowing is [ABR Loans]
[Eurodollar Rate Loans].

     (iii) The aggregate amount of the Proposed Borrowing is $________.

     [(v) The initial Interest Period for each Loan made as part of the Proposed
Borrowing is ____ months.](1)


- --------
(1)  To be included for a Proposed Borrowing comprised of Eurodollar Rate Loans.


   70
     The undersigned hereby acknowledges that the delivery of this Notice of
Borrowing shall constitute a representation and warranty by the Borrower that,
on the date of the Proposed Borrowing, the statements contained in Sections
6.02(a) and 6.03(a) of the Credit Agreement are true.

                             Very truly yours,

                             CMS ENERGY CORPORATION


                             By
                                ------------------------------------------------
                                Name:
                                Title:



   71
                                                                       EXHIBIT B


                          FORM OF NOTICE OF CONVERSION


                                     [Date]

The Chase Manhattan Bank, as Administrative
  Agent for the Lenders parties to the
  Credit Agreement referred to below

Attention:        Michael Cerniglia

Ladies and Gentlemen:

     The undersigned, CMS Energy Corporation, refers to the Credit Agreement,
dated as of June 27, 2000 (as amended, modified or supplemented from time to
time, the "CREDIT AGREEMENT", the terms defined therein and not otherwise
defined herein being used herein as therein defined), among the Borrower, the
Lenders named therein, The Chase Manhattan Bank, as Administrative Agent and
Collateral Agent, Bank of America, N.A. and Barclays Bank plc, as Co-Syndication
Agents, and Citibank, N.A. as Documentation Agent, and hereby gives you notice,
irrevocably, pursuant to Section 3.02 of the Credit Agreement that the
undersigned hereby requests a Conversion under the Credit Agreement, and in that
connection sets forth below the information relating to such Conversion (the
"PROPOSED CONVERSION") as required by Section 3.02 of the Credit Agreement:

     (i) The Business Day of the Proposed Conversion is ________ __, 20__.

     (ii) The Type of Loans comprising the Proposed Conversion is [ABR Loans]
[Eurodollar Rate Loans].

     (iii) The aggregate amount of the Proposed Conversion is $________.

     (iv) The Type of Loans to which such Loans are proposed to be Converted is
[ABR Loans] [Eurodollar Rate Loans].

     (v) The Interest Period for each Loan made as part of the Proposed
Conversion is ____ month(s).(2)


- --------
(2)  Delete for ABR Loans.

   72
     The undersigned hereby certifies that the Borrower's request for the
Proposed Conversion is made in compliance with Sections 3.02, 3.03 and 3.04 of
the Credit Agreement. The undersigned hereby acknowledges that the delivery of
this Notice of Conversion shall constitute a representation and warranty by the
Borrower that, on the date of the Proposed Conversion, [(i)] the statements
contained in Section 6.02(a) of the Credit Agreement are true and [(ii) no
Default [(other than a Default resulting from the failure of the Borrower to
comply with the ratio set forth in Section 8.01(j) of the Credit Agreement)](3)
has occurred and is continuing](4).

                             Very truly yours,

                             CMS ENERGY CORPORATION



                             By
                                ------------------------------------------------
                                Name:
                                Title:










- --------
(3)  Include only if a Default has occurred and is continuing as the result of
the failure of the Borrower to comply with the ratio set forth in Section
8.01(j) of the Credit Agreement. In such case, a Conversion into Eurodollar Rate
Loans with an Interest Period not to exceed three months in duration is
permitted pursuant to Section 3.04(a)(vi) of the Credit Agreement.


(4)  Delete if Conversion is into ABR Loans.


   73
                                                                       EXHIBIT C


                        FORM OF CASH COLLATERAL AGREEMENT


     CASH COLLATERAL AGREEMENT, dated as of June 30, 2000, made by CMS ENERGY
CORPORATION, a Michigan corporation (the "PLEDGOR"), to The Chase Manhattan Bank
("CHASE"), as collateral agent (the "COLLATERAL AGENT") for the lenders (the
"LENDERS") parties to the Credit Agreement (as hereinafter defined).

                             PRELIMINARY STATEMENTS

     (1) Chase, as Administrative Agent and Collateral Agent, Bank of America,
N.A. and Barclays Bank plc, as Co-Syndication Agents, and Citibank, N.A. as
Documentation Agent, and the Lenders have entered into a Credit Agreement, dated
as of June 27, 2000 (said Agreement, as it may hereafter be amended or otherwise
modified from time to time, being the "CREDIT AGREEMENT", the terms defined
therein and not otherwise defined herein being used herein as therein defined),
with the Pledgor.

     (2) Pursuant to Section 5.03(b) of the Credit Agreement, any prepayments
required by such subsection are to be applied to outstanding ABR Loans up to the
full amount thereof before they are applied, first, to outstanding Eurodollar
Rate Loans and, second, as cash collateral, pursuant to this Agreement, to
secure LC Outstandings.

     (3) The cash collateral referenced in preliminary statement (2), above,
shall be deposited by the Collateral Agent in a special non-interest-bearing
cash collateral account (the "ACCOUNT") with the Collateral Agent at its office
at 1 Chase Manhattan Plaza, New York, New York 10081, Account No. 910-2-787398
(or at such other office of the Collateral Agent as the Collateral Agent may,
from time to time, notify the Pledgor), in the name of the Pledgor but under the
sole control and dominion of the Collateral Agent and subject to the terms of
this Agreement.

     NOW THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor hereby agrees with the Collateral Agent for its
benefit and the ratable benefit of the Lenders as follows:

     SECTION 1. PLEDGE AND ASSIGNMENT. The Pledgor hereby pledges and assigns to
the Collateral Agent for its benefit and the ratable benefit of the Lenders, and
grants to the Collateral Agent for its benefit and the ratable benefit of the
Lenders a security interest in, the following collateral (the "COLLATERAL"):

          (i) the Account, all funds held therein and all certificates and
     instruments, if any, from time to time representing or evidencing the
     Account;
   74

          (ii) all Investments (as hereinafter defined) from time to time, and
     all certificates and instruments, if any, from time to time representing or
     evidencing the Investments;

          (iii) all notes, certificates of deposit, deposit accounts, checks and
     other instruments from time to time hereafter delivered to or otherwise
     possessed by the Collateral Agent for or on behalf of the Pledgor in
     substitution for or in addition to any or all of the then existing
     Collateral;

          (iv) all interest, dividends, cash, instruments and other property
     from time to time received, receivable or otherwise distributed in respect
     of or in exchange for any or all of the then existing Collateral; and

          (v) all proceeds of any and all of the foregoing Collateral.

     SECTION 2. SECURITY FOR OBLIGATIONS. This Agreement secures the payment of
all reimbursement obligations of the Pledgor now or hereafter existing with
respect to LC Outstandings, and all obligations of the Pledgor now or hereafter
existing under this Agreement (all such obligations of the Pledgor being the
"OBLIGATIONS"). Without limiting the generality of the foregoing, this Agreement
secures the payment of all amounts which constitute part of the Obligations and
would be owed by the Pledgor to the Collateral Agent or the Lenders under the
Credit Agreement and the Promissory Notes (if any) but for the fact that they
are unenforceable or not allowable due to the existence of a bankruptcy,
reorganization or similar proceeding involving the Pledgor.

     SECTION 3. DELIVERY OF COLLATERAL. All certificates or instruments, if any,
representing or evidencing the Collateral shall be delivered to and held by or
on behalf of the Collateral Agent pursuant hereto and shall be in suitable form
for transfer by delivery, or shall be accompanied by duly executed instruments
of transfer or assignment in blank, all in form and substance satisfactory to
the Collateral Agent. The Collateral Agent shall have the right, at any time
upon the occurrence and during the continuance of an Event of Default or a
Default, in its discretion and without notice to the Pledgor, to transfer to or
to register in the name of the Collateral Agent or any of its nominees any or
all of the Collateral. In addition, the Collateral Agent shall have the right at
any time to exchange certificates or instruments representing or evidencing
Collateral for certificates or instruments of smaller or larger denominations.

     SECTION 4. MAINTAINING THE ACCOUNT. So long as any Lender has any
Commitment under the Credit Agreement or interest thereon shall remain unpaid:

          (a) The Pledgor will maintain the Account with the Collateral Agent.

          (b) It shall be a term and condition of the Account, notwithstanding
     any term or condition to the contrary in any other agreement relating to
     the Account and except as otherwise provided by the provisions of Section 6
     and Section 13, that no amount (including interest on the Account, if any)
     shall be paid or released to or for the account of, or withdrawn by or for
     the account of, the Pledgor or any other Person (other than the Collateral
     Agent and the Lenders) from the Account.
   75
     The Account shall be subject to such applicable laws, and such applicable
regulations of the Board of Governors of the Federal Reserve System and of any
other appropriate banking or governmental authority, as may now or hereafter be
in effect.

     SECTION 5. INVESTING OF AMOUNTS IN THE ACCOUNT. If requested by the
Pledgor, the Collateral Agent will, subject to the provisions of Section 6 and
Section 13, from time to time (a) invest amounts on deposit in the Account in
such Permitted Investments as the Pledgor may select and the Collateral Agent
may approve and (b) invest interest paid on the Permitted Investments referred
to in clause (a) above, and reinvest other proceeds of any such Permitted
Investments which may mature or be sold, in each case in such Permitted
Investments as the Pledgor may select and the Collateral Agent may approve (the
Permitted Investments referred to in clauses (a) and (b) above, being
collectively "INVESTMENTS"). Interest and proceeds that are not invested or
reinvested in Investments as provided above shall be deposited and held in the
Account.

     SECTION 6. RELEASE OF AMOUNTS. So long as no Event of Default or Default
shall have occurred and be continuing, the Collateral Agent will pay and release
to the Pledgor or at its order, upon the request of the Pledgor, (a) amounts of
credit balance of the Account and of principal of any other Collateral when
matured or sold to the extent that (i) the sum of the credit balance of the
Account plus the aggregate outstanding principal amount of all other Collateral
exceeds (ii) the aggregate amount of LC Outstandings in respect of all Letters
of Credit and all other amounts owing by the Pledgor hereunder, (b) all amounts
in the Account if the Commitments under the Loan Agreement exceed the aggregate
amount of LC Outstandings in respect of all Letters of Credit and all other
amounts owing by the Pledgor hereunder and (c) all interest and earnings on the
Investments deposited and held in the Account.

     SECTION 7. REPRESENTATIONS AND WARRANTIES. The Pledgor represents and
warrants as follows:

          (a) The Pledgor is the legal and beneficial owner of the Collateral
     free and clear of any lien, security interest, option or other charge or
     encumbrance except for the security interest created by this Agreement.

          (b) The pledge and assignment of the Collateral pursuant to this
     Agreement creates a valid and perfected first priority security interest in
     the Collateral, securing the payment of the Obligations.

          (c) No consent of any other Person and no authorization, approval, or
     other action by, and no notice to or filing with, any governmental
     authority or regulatory body is required (i) for the pledge and assignment
     by the Pledgor of the Collateral pursuant to this Agreement or for the
     execution, delivery or performance of this Agreement by the Pledgor, (ii)
     for the perfection or maintenance of the security interest created hereby
     (including the first priority nature of such security interest) or (iii)
     for the exercise by the Collateral Agent of its rights and remedies
     hereunder.

          (d) There are no conditions precedent to the effectiveness of this
     Agreement that have not been satisfied or waived.


   76

          (e) The Pledgor has, independently and without reliance upon the
     Collateral Agent or any Lender and based on such documents and information
     as it has deemed appropriate, made its own credit analysis and decision to
     enter into this Agreement.

     SECTION 8. FURTHER ASSURANCES. The Pledgor agrees that at any time and from
time to time, at the expense of the Pledgor, the Pledgor will promptly execute
and deliver all further instruments and documents, and take all further action,
that may be necessary or desirable, or that the Collateral Agent may reasonably
request, in order to perfect and protect any security interest granted or
purported to be granted hereby or to enable the Collateral Agent to exercise and
enforce its rights and remedies hereunder with respect to any Collateral.

     SECTION 9. TRANSFERS AND OTHER LIENS. The Pledgor agrees that it will not
(i) sell, assign (by operation of law or otherwise) or otherwise dispose of, or
grant any option with respect to, any of the Collateral, or (ii) create or
permit to exist any lien, security interest, option or other charge or
encumbrance upon or with respect to any of the Collateral, except for the
security interest under this Agreement.

     SECTION 10. COLLATERAL AGENT APPOINTED ATTORNEY-IN-FACT. The Pledgor hereby
appoints the Collateral Agent the Pledgor's attorney-in-fact, with full
authority in the place and stead of the Pledgor and in the name of the Pledgor
or otherwise, from time to time upon the occurrence and during the continuance
of an Event of Default or Default or otherwise to the extent that the Collateral
Agent shall reasonably deem any action to be necessary in order to maintain its
security interest in the Collateral, in the Collateral Agent's discretion, to
take any action and to execute any instrument which the Collateral Agent may
deem necessary or advisable to accomplish the purposes of this Agreement,
including, without limitation, to receive, indorse and collect all instruments
made payable to the Pledgor representing any interest payment, dividend or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.

     SECTION 11. COLLATERAL AGENT MAY PERFORM. If the Pledgor fails to perform
any agreement contained herein, the Collateral Agent may itself perform, or
cause performance of, such agreement, and the expenses of the Collateral Agent
incurred in connection therewith shall be payable by the Pledgor under Section
14.

     SECTION 12. THE COLLATERAL AGENT'S DUTIES. The powers conferred on the
Collateral Agent hereunder are solely to protect its interest in the Collateral
and shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Collateral in its possession and the accounting for
moneys actually received by it hereunder, the Collateral Agent shall have no
duty as to any Collateral, as to ascertaining or taking action with respect to
calls, conversions, exchanges, maturities, tenders or other matters relative to
any Collateral, whether or not the Collateral Agent or any Lender has or is
deemed to have knowledge of such matters, or as to the taking of any necessary
steps to preserve rights against any parties or any other rights pertaining to
any Collateral. The Collateral Agent shall be deemed to have exercised
reasonable care in the custody and preservation of any Collateral in its
possession if such Collateral is accorded treatment substantially equal to that
which the Collateral Agent accords its own property.


   77

     SECTION 13. REMEDIES UPON DEFAULT. If any Event of Default shall have
occurred and be continuing:

          (a) The Collateral Agent may, without notice to the Pledgor except as
     required by law and at any time or from time to time, charge, set-off and
     otherwise apply all or any part of the Account against the Obligations or
     any part thereof.

          (b) The Collateral Agent may also exercise in respect of the
     Collateral, in addition to other rights and remedies provided for herein or
     otherwise available to it, all the rights and remedies of a secured party
     on default under the Uniform Commercial Code in effect in the State of New
     York at that time (the "CODE") (whether or not the Code applies to the
     affected Collateral), and may also, without notice except as specified
     below, sell the Collateral or any part thereof in one or more parcels at
     public or private sale, at any of the Collateral Agent's offices or
     elsewhere, for cash, on credit or for future delivery, and upon such other
     terms as the Collateral Agent may deem commercially reasonable. The Pledgor
     agrees that, to the extent notice of sale shall be required by law, at
     least ten days' notice to the Pledgor of the time and place of any public
     sale or the time after which any private sale is to be made shall
     constitute reasonable notification. The Collateral Agent shall not be
     obligated to make any sale of Collateral regardless of notice of sale
     having been given. The Collateral Agent may adjourn any public or private
     sale from time to time by announcement at the time and place fixed
     therefor, and such sale may, without further notice, be made at the time
     and place to which it was so adjourned.

          (c) Any cash held by the Collateral Agent as Collateral and all cash
     proceeds received by the Collateral Agent in respect of any sale of,
     collection from, or other realization upon all or any part of the
     Collateral may, in the discretion of the Collateral Agent, be held by the
     Collateral Agent as collateral for, and/or then or at any time thereafter
     be applied (after payment of any amounts payable to the Collateral Agent
     pursuant to Section 14) in whole or in part by the Collateral Agent for the
     ratable benefit of the Lenders against, all or any part of the Obligations
     in such order as the Collateral Agent shall elect. Any surplus of such cash
     or cash proceeds held by the Collateral Agent and remaining after payment
     in full of all the Obligations shall be paid over to the Pledgor or to
     whomsoever may be lawfully entitled to receive such surplus.

     SECTION 14. EXPENSES. The Pledgor will upon demand pay to the Collateral
Agent the amount of any and all reasonable expenses, including the reasonable
fees and expenses of its counsel and of any experts and agents, which the
Collateral Agent may incur in connection with (i) the administration of this
Agreement, (ii) the custody or preservation of, or the sale of, collection from,
or other realization upon, any of the Collateral, (iii) the exercise or
enforcement of any of the rights of the Collateral Agent or the Lenders
hereunder or (iv) the failure by the Pledgor to perform or observe any of the
provisions hereof.

     SECTION 15. AMENDMENTS, ETC. No amendment or waiver of any provision of
this Agreement, and no consent to any departure by the Pledgor herefrom shall in
any event be effective unless the same shall be in writing and signed by the
Collateral Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.


   78

     SECTION 16. ADDRESSES FOR NOTICES. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, facsimile,
telex or cable communication) and mailed, telegraphed, telecopied, telexed,
cabled or delivered, if to the Pledgor, at its address at Fairlane Plaza South,
330 Town Center Drive, Suite 1100, Dearborn, Michigan 48126, Attention: Rodger
A. Kershner, Esq., with a copy to Laura L. Mountcastle, Vice President, Investor
Relations and Treasurer, at the same address, and if to the Collateral Agent, at
its address specified in the Credit Agreement, or, as to either party, at such
other address as shall be designated by such party in a written notice to the
other party. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective five days after when
deposited in the mails, or when delivered to the telegraph company, telecopied,
confirmed by telex answerback or delivered to the cable company, respectively.

     SECTION 17. CONTINUING SECURITY INTEREST; ASSIGNMENTS UNDER CREDIT
AGREEMENT. This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the later of (x)
the payment in full of the Obligations and all other amounts payable under this
Agreement and (y) the expiration or termination of the Commitments under the
Credit Agreement, (ii) be binding upon the Pledgor, its successors and assigns,
and (iii) inure to the benefit of, and be enforceable by, the Collateral Agent,
the Lenders and their respective successors, transferees and assigns. Without
limiting the generality of the foregoing clause (iii), any Lender may assign or
otherwise transfer all or any portion of its rights and obligations under the
Credit Agreement (including, without limitation, all or any portion of its
Commitment, the Loans owing to it and any Promissory Notes held by it) to any
other Person, and such other Person shall thereupon become vested with all the
benefits in respect thereof granted to such Lender herein or otherwise, subject,
however, to the provisions of Article X (concerning the Agents) and Section
11.07 of the Credit Agreement. Upon the later of the payment in full of the
Obligations and all other amounts payable under this Agreement and the
expiration or termination of the Commitments under the Credit Agreement, the
security interest granted hereby shall terminate and all rights to the
Collateral shall revert to the Pledgor. Upon any such termination, the
Collateral Agent will, at the Pledgor's expense, return to the Pledgor such of
the Collateral as shall not have been sold or otherwise applied pursuant to the
terms hereof and execute and deliver to the Pledgor such documents as the
Pledgor shall reasonably request to evidence such termination.

     SECTION 18. GOVERNING LAW; TERMS. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, except to the
extent that perfection of the security interest hereunder, or remedies
hereunder, in respect of any particular Collateral are governed by the laws of a
jurisdiction other than the State of New York. Unless otherwise defined herein
or in the Credit Agreement, terms defined in Article 9 of the Code are used
herein as therein defined.


   79
     IN WITNESS WHEREOF, the Pledgor has caused this Agreement to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.

                                  CMS ENERGY CORPORATION


                                  By
                                     -------------------------------------------
                                     Name:
                                     Title:


ACCEPTED AND AGREED:

THE CHASE MANHATTAN BANK,
  as Collateral Agent


By
  -------------------------------------------
  Name:
  Title:


   80
                                                                       EXHIBIT D


                                 FORM OF OPINION
                           OF COUNSEL FOR THE BORROWER


                                  June 30, 2000


To:      Each of the Lenders  parties to the Credit  Agreement
         referred to below,  The Chase  Manhattan  Bank,  as a
         Administrative  Agent and Collateral  Agent under the
         Credit Agreement,  and the Co-Syndication  Agents and
         Documentation Agent named therein

Ladies and Gentlemen:

          This letter is furnished to you pursuant to Section 6.01(a)(viii)(A)
of the Credit Agreement, dated as of June 27, 2000 (the "CREDIT AGREEMENT"),
among CMS Energy Corporation (the "BORROWER"), the Banks parties thereto and the
other Lenders from time to time parties thereto, The Chase Manhattan Bank
("CHASE"), as Administrative Agent and as Collateral Agent, Bank of America,
N.A. and Barclays Bank plc, as Co-Syndication Agents, and Citibank, N.A. as
Documentation Agent. Capitalized terms not defined herein have the meanings
ascribed thereto in the Credit Agreement and the other Loan Documents (as
defined in the Credit Agreement).

          I am Assistant General Counsel of the Borrower and I, or an attorney
or attorneys under my general supervision, have represented the Borrower in
connection with the preparation, execution and delivery of, and the initial
Extension of Credit made under, the Credit Agreement and other Loan Documents.

          In that capacity, I, or an attorney or attorneys under my general
supervision, have examined:

          (a)  The Credit Agreement;

          (b)  The Cash Collateral Agreement;

          (c)  The Issuing Bank Agreement;

          (d)  The Restated Articles of Incorporation of the Borrower and all
               amendments thereto (the "CHARTER");

          (e)  The bylaws of the Borrower and all amendments thereto (the
               "BYLAWS"); and


   81

          (f)  The Promissory Notes executed and delivered by the Borrower on
               the date hereof.

          In addition, I, or an attorney or attorneys under my general
supervision, have examined the originals, or copies certified to my
satisfaction, of such other corporate records of the Borrower, certificates of
public officials and of officers of the Borrower, and agreements, instruments
and other documents, as I have deemed necessary as a basis for the opinions
expressed below. As to various questions of fact material to such opinions, I
have, when relevant facts were not independently established by me, relied upon
the representations of officers of the Borrower in the Loan Documents, and upon
certificates of the Borrower or its officers or of public officials.

          I have assumed (i) the due execution and delivery, pursuant to due
authorization, of each document referred to in clauses (a), (b) and (c) above by
all parties to such document (other than the Borrower), (ii) the authenticity of
all such documents submitted to us as originals, (iii) the genuineness of all
signatures (other than those of the Borrower), and (iv) the conformity to the
originals of all such documents submitted to us as copies.

          Based upon the foregoing and upon such investigation as we have deemed
necessary, I am of the following opinion:

          1. The Borrower is a corporation duly organized, validly existing and
     in good standing under the laws of the State of Michigan.

          2. The execution, delivery and performance by the Borrower of the
     Credit Agreement and the other Loan Documents to which it is, or is to be,
     a party, are within the corporate power and authority of the Borrower, have
     been duly authorized by all necessary corporate action, and do not
     contravene (a) the Charter or the Bylaws, (b) any provision of applicable
     law or (c) any legal or contractual restriction binding on the Borrower or
     its properties; and such execution, delivery and performance do not result
     in or require the creation or imposition of any mortgage, deed of trust,
     pledge, or Lien upon or with respect to any of its properties (other than
     under the Cash Collateral Agreement). The Credit Agreement, the Cash
     Collateral Agreement and the Promissory Notes have been duly executed and
     delivered on behalf of the Borrower.

          3. Except as disclosed in the Borrower's Annual Report on Form 10-K
     for the fiscal year ended December 31, 1999, the Borrower's Quarterly
     Report on Form 10-Q for the period ended March 31, 2000 and the Current
     Report on Form 8-K filed by the Borrower on June 5, 2000, there are no
     pending or threatened actions or proceedings against the Borrower or its
     properties before any court, governmental agency or arbitrator, that could,
     if adversely determined, reasonably be expected to materially adversely
     affect the financial condition, properties, business or operations of the
     Borrower, the legality, validity or enforceability of the Credit Agreement
     or any other Loan Document to which the Borrower is, or is to be, a party,
     or the validity, enforceability, perfection or priority of any Lien
     purported to be granted by or under the Cash Collateral Agreement.


   82

          4. No authorization or approval or other action by, and no notice to
     or filing with, any Michigan governmental authority or regulatory body
     (including, without limitation, the Michigan Public Service Commission) is
     required for (a) the valid execution, delivery and performance by the
     Borrower of the Credit Agreement and the other Loan Documents to which it
     is, or is to be, a party or (b) the creation of any Lien purported to be
     granted or created pursuant to the Cash Collateral Agreement.

          5. In any action or proceeding arising out of or relating to the
     Credit Agreement or any other Loan Document to which the Borrower is, or is
     to be, a party in any Michigan state court or any Federal court sitting in
     the State of Michigan, such court would recognize and give effect to the
     provisions of the Credit Agreement or any other Loan Document, as the case
     may be, wherein the parties thereto agree that the Credit Agreement or such
     other Loan Document, as the case may be, shall be governed by, and
     construed in accordance with, the laws of the State of New York, except in
     the case of those provisions set forth in the Credit Agreement and the
     other Loan Documents the enforcement of which would contravene a
     fundamental policy of the State of Michigan. In the course of our review of
     the Credit Agreement and the other Loan Documents, nothing has come to my
     attention to indicate that any of such provisions would do so.

          The opinions expressed herein are limited to the laws of the State of
Michigan and the Federal laws of the United States of America.

          I consent to the reliance on this opinion by Sidley & Austin in their
opinion to you of even date herewith delivered pursuant to Section
6.01(a)(viii)(B) of the Credit Agreement. Except as otherwise specified herein,
this opinion is being delivered solely for the benefit of the parties to whom it
is addressed. Accordingly, it may not be quoted, filed with any governmental
authority or otherwise circulated or utilized for any other purpose without my
prior written consent.

                                            Very truly yours,



   83
                                                                       EXHIBIT E


                        FORM OF OPINION OF COUNSEL TO THE
                              ADMINISTRATIVE AGENT


                                  June 30, 2000

To:      Each of the Lenders  parties to the Credit  Agreement
         referred to below,  The Chase  Manhattan  Bank,  as a
         Administrative  Agent and Collateral  Agent under the
         Credit Agreement,  and the Co-Syndication  Agents and
         Documentation Agent named therein

                  Re:  CMS Energy Corporation

Ladies and Gentlemen:

          We have acted as special New York counsel to The Chase Manhattan Bank,
individually and as Administrative Agent, in connection with the execution and
delivery of, and the making of the initial Extension of Credit on this date
under, the Credit Agreement, dated as of June 27, 2000 (the "CREDIT AGREEMENT"),
among CMS Energy Corporation, the Banks parties thereto and the other Lenders
from time to time parties thereto, The Chase Manhattan Bank, as Administrative
Agent and as Collateral Agent, Bank of America, N.A. and Barclays Bank plc, as
Co-Syndication Agents, and Citibank, N.A. as Documentation Agent. Terms defined
in the Credit Agreement are used herein as therein defined.

          In this connection, we have examined the following documents:

          1. a counterpart of the Credit Agreement, executed by the parties
     thereto; and

          2. the other documents furnished to the Administrative Agent pursuant
     to Section 6.01(a) of the Credit Agreement, including (without limitation)
     the opinion of Michael D. VanHemert, Assistant General Counsel of the
     Borrower.

          In our examination of the documents referred to above, we have assumed
the authenticity of all such documents submitted to us as originals, the
genuineness of all signatures, the due authority of the parties executing such
documents and the conformity to the originals of all such documents submitted to
us as copies. We have further assumed that you have evaluated, and are satisfied
with, the creditworthiness of the Borrower and the business and financial terms
evidenced by the Loan Documents. We have relied, as to factual matters, on the
documents we have examined.

          To the extent that our opinions expressed below involve conclusions as
to matters governed by law other than the law of the State of New York, we have
relied upon the opinion,



   84

dated the date hereof, of Michael D. VanHemert, Assistant General Counsel of the
Borrower, and have assumed without independent investigation the correctness of
the matters set forth therein.

          Based upon and subject to the foregoing, and subject to the
qualifications set forth below, we are of the following opinion:

          1. The Credit Agreement and the Cash Collateral Agreement, the Issuing
     Bank Agreement and the Promissory Notes delivered on the date hereof
     pursuant to Section 6.01(a) of the Credit Agreement are the legal, valid
     and binding obligations of the Borrower, enforceable against the Borrower
     in accordance with their respective terms.

          2. The Cash Collateral Agreement will, upon the deposit of cash with
     the Collateral Agent pursuant thereto, create a valid security interest in
     the Collateral (as defined therein, but excluding the Account (as defined
     therein) and any other type of Collateral that is not subject to Article 9
     of the UCC) securing payment of the Obligations (as defined therein).

          Our opinion is subject to the following qualifications:

          (a) The enforceability of the Borrower's obligations under the Credit
     Agreement, the Cash Collateral Agreement, the Issuing Bank Agreement and
     the Promissory Notes is subject to the effect of any applicable bankruptcy,
     insolvency, fraudulent conveyance, reorganization, moratorium or similar
     law affecting creditors' rights generally.

          (b) The enforceability of the Borrower's obligations under the Credit
     Agreement, the Cash Collateral Agreement, the Issuing Bank Agreement and
     the Promissory Notes is subject to the effect of general principles of
     equity, including (without limitation) concepts of materiality,
     reasonableness, good faith and fair dealing (regardless of whether
     considered in a proceeding in equity or at law). Such principles of equity
     are of general application, and, in applying such principles, a court,
     among other things, might not allow a contracting party to exercise
     remedies in respect of a default deemed immaterial, or might decline to
     order an obligor to perform covenants.

          (c) We note further that, in addition to the application of equitable
     principles described above, courts have imposed an obligation on
     contracting parties to act reasonably and in good faith in the exercise of
     their contractual rights and remedies, and may also apply public policy
     considerations in limiting the right of parties seeking to obtain
     indemnification under circumstances where the conduct of such parties is
     determined to have constituted negligence.

          (d) We express no opinion herein as to (i) Section 11.05 of the Credit
     Agreement, (ii) the enforceability of provisions purporting to grant to a
     party conclusive rights of determination, (iii) the availability of
     specific performance or other equitable remedies, (iv) the enforceability
     of rights to indemnity under federal or state securities laws or (v) the
     enforceability of waivers by parties of their respective rights and
     remedies under law. In addition, our opinion in paragraph 1 above is
     subject to the further

   85
     qualification that certain provisions of the Cash Collateral Agreement are
     or may be unenforceable in whole or in part under the laws of the State of
     New York, but the inclusion of such provisions does not affect the validity
     of the Cash Collateral Agreement and the Cash Collateral Agreement contains
     adequate provisions for the practical realization of the rights and
     benefits afforded thereby, except for the economic consequences of any
     delay which may be imposed thereby or result therefrom.

          (e) With respect to the opinions set forth in paragraph 2 above, we
     have assumed that the Borrower has not granted or permitted, nor does there
     otherwise exist, any execution or attachment on any of the Collateral or
     any other Lien therein or thereon which does not require steps for
     perfection under the Uniform Commercial Code of any jurisdiction to be
     enforceable against third parties.

          (f) We express no opinion herein as to:

               (i) the Borrower's rights in or title to any Collateral, or the
     authenticity or enforceability thereof;

               (ii) the perfection or priority of any security interests.

          (g) Our opinions expressed above are limited to the law of the State
     of New York, and we do not express any opinion herein concerning any other
     law.

          The foregoing opinion is solely for your benefit and may not be relied
upon by any other person or entity, other than any Person that may become a
Lender under the Credit Agreement after the date hereof.


                                            Very truly yours,




   86
                                                                       EXHIBIT F


                          COMPUTATIONS USED BY BORROWER
                    IN DETERMINING COMPLIANCE WITH COVENANTS
                    CONTAINED IN SECTIONS 8.01(I) AND 8.01(J)


(Capitalized terms used herein and not otherwise defined shall have the meanings
ascribed thereto in the Credit Agreement, dated as of June 27, 2000, among CMS
Energy Corporation, the Banks named therein, The Chase Manhattan Bank, as
Administrative Agent and as Collateral Agent, Bank of America, N.A. and Barclays
Bank plc, as Co-Syndication Agents, and Citibank, N.A. as Documentation Agent.)


                                                                                
I.       SECTION 8.01(i) (Consolidated Leverage Ratio)

         (i)      Consolidated Debt


                  (a)      Debt of the Borrower (See worksheet set
                           forth on Schedule 1 hereto), plus                            $
                                                                                         ------

                  (b)      Aggregate debt of the Consolidated Subsidiaries (as
                           such term is construed in accordance with GAAP), less        $
                                                                                         ------

                  (c)      Project Finance Debt of the Borrower and the
                           Consolidated Subsidiaries                                    $
                                                                                         ------

                                            Total Consolidated Debt                     $
                                                                                         ------

         (ii)     Consolidated EBITDA

                  (a)      Pretax Operating Income                                      $
                                                                                         ------

                  (b)      Consolidated depreciation, depletion and amortization
                           of the Borrower and the Consolidated Subsidiaries            $
                                                                                         ------

                  (c)      Consolidated non-cash write-offs contained in
                           pre-tax operating income of the Borrower and
                           the Consolidated Subsidiaries                                $
                                                                                         ------

                                            Total Consolidated EBITDA                   $
                                                                                         ------

         (iii)    Consolidated Leverage Ratio (i/ii)
                                                                                         ------
                  Maximum Ratio - Section 8.01(i)
                                                                                         ------



   87

                                                                                
II.      SECTION 8.01(j) (Cash Dividend Coverage Ratio)

         (i)      Cash Dividend Income

                  (a)      Cash Dividend Income                                         $
                                                                                         --------

                  (b)      25% of Equity Distributions received by the
                           Borrower (not to exceed $10,000,000)                         $
                                                                                         --------

                  (c)      All amounts received by the Borrower from its
                           Subsidiaries and Affiliates constituting
                           reimbursement of interest expense (including
                           commitment, guaranty and letter of credit fees) paid
                           by the Borrower on behalf of any such Subsidiary or
                           Affiliate                                                    $
                                                                                         --------
                                            Total Cash Dividend Income                  $
                                                                                         --------

         (ii)     Interest expense (including commitment, guaranty and letter
                  of credit fees) accrued by the Borrower in respect of all Debt        $
                                                                                         --------

         (iii)    Cash Dividend Income/Interest Expense Ratio ((i)/(ii))
                                                                                        ---------

                  Minimum Ratio - Section 8.01(j)
                                                                                        ---------

III.     Project Finance Debt(5)

IV.      Support Obligations(6)

V.       Junior Subordinated Debt/Guaranties of Hybrid Preferred Securities(7)

VI.      Other Hybrid Debt/Equity Securities(8)




- --------
(5)  Set forth all Project Finance Debt of any Consolidated Subsidiary and the
Borrower's Ownership Interest in such Consolidated Subsidiary.

(6)  Set forth all Support Obligations of the Borrower of the types described in
clauses (iv) and (v) of the definition of Support Obligations (whether or not
each such Support Obligation or the primary obligation so supported is fixed,
conclusively determined or reasonably quantifiable) unless such Support
Obligation is previously disclosed as "CONSOLIDATED DEBT" pursuant to Section I
or II above.

(7)  Set forth all Junior Subordinated Debt owned by any Hybrid Preferred
Securities Subsidiary and all guaranties by the Borrower of payments with
respect to any Hybrid Preferred Securities.

(8)  Set forth any hybrid debt/equity securities (other than Junior Subordinated
Debt and Hybrid Preferred Securities) issued by the Borrower or any Consolidated
Subsidiary and the amount of the Net Proceeds from each such issuance.


   88

                                   Schedule 1
                                       to
                                    Exhibit F

                  Computation of Aggregate Debt of the Borrower

Aggregate Debt of the Borrower shall include (without duplication) any and all
indebtedness, liabilities and other monetary obligations of the Borrower
(whether for principal, interest, fees, costs, expenses or otherwise, and
contingent or otherwise):(9)


                                                                                
         (i)      for borrowed money or evidenced by bonds,
                  debentures, notes or other similar instruments                        $
                                                                                         ------

         (ii)     to pay the deferred purchase price of property or services
                  (except trade accounts payable arising in the ordinary
                  course of business which are not overdue)                             $
                                                                                         ------

         (iii)    as lessee under leases which shall have been or should be,
                  in accordance with GAAP, recorded as capital leases                   $
                                                                                         ------

         (iv)     under reimbursement or similar agreements with respect to
                  letters of credit issued thereunder                                   $
                                                                                         ------

         (v)      under any interest rate swap, "cap", "collar" or other hedging
                  agreements; provided, however, for purposes of the calculation
                  of Debt for this clause only, the actual amount of Debt of the
                  Borrower shall be determined on a net basis to the extent such
                  agreements permit such
                  amounts to be calculated on a net basis                               $
                                                                                         ------

         (vi)     to pay rent or other amounts under leases entered into
                  in connection with sale and leaseback transactions involving
                  assets of the Borrower being sold in connection therewith             $
                                                                                         ------

         (vii)    arising from any accumulated funding deficiency (as
                  defined in Section 412(a) of the Internal Revenue Code of
                  1986, as amended) for a Plan                                          $
                                                                                         ------

         (viii)   direct or indirect guaranties in respect of, and obligations
                  to purchase or otherwise acquire, or otherwise to warrant or
                  hold harmless, pursuant to a legally binding agreement, a
                  creditor against loss in respect of, Debt of others referred
                  to in clauses (i) through (vii) above                                 $
                                                                                         ------



- --------
(9)  See the definition of "Consolidated Debt" contained in the Credit Agreement
for certain exclusions from Debt of the Borrower.


   89
                                                                                

         (ix)     other guaranty or similar financial obligations in respect
                  of the performance of others, including, without limitation,
                  any financial obligation, contingent or otherwise, of the
                  Borrower guaranteeing or otherwise supporting any Debt
                  or other obligation of any other Person in any manner,
                  whether directly or indirectly, and including, without limitation,
                  any obligation of such Person, direct or indirect                     $
                                                                                         ------

                  (A)      to purchase or pay (or advance or supply funds for
                           the purchase or payment of) such Debt or to purchase
                           (or to advance or supply funds for the purchase of)
                           any security for the payment
                           of such Debt                                                 $
                                                                                         ------

                  (B)      to purchase property, securities or services for
                           the purpose of assuring the owner of such Debt
                           of the payment of such Debt                                  $
                                                                                         ------

                  (C)      to maintain working capital, equity capital,
                           available cash or other financial statement condition
                           of the primary obligor so as to enable the primary
                           obligor to pay such Debt                                     $
                                                                                         ------

                  (D)      to provide equity capital under or in respect of
                           equity subscription arrangements (to the extent that
                           such obligation to provide equity
                           capital does not otherwise constitute Debt(10)               $
                                                                                         ------

                  (E)      to perform, or arrange for the performance of,
                           any non-monetary obligations or non-funded
                           debt payment obligations of the primary obligor(11)          $
                                                                                         ------

                  (F)      Other                                                        $
                                                                                         ------

                                            Total of Debt of the Borrower               $
                                                                                          -----



- --------
(10) Set forth only the net amount of certain Support Obligations provided by
the Borrower in connection with the purchases and sales of natural gas, natural
gas liquids, gas condensates, electricity, oil, propane, coal, any other
commodity, weather derivatives or any derivative instrument by MS&T, as detailed
in Annex A to this Schedule 1.

(11) For purposes of this clause do not include Support Obligations if such
Support Obligation or the primary obligation so supported is not fixed or
conclusively determined or is not otherwise reasonably quantifiable as of the
date of determination.



   90
                                     Annex A
                                       to
                                   Schedule 1

                     Details Regarding MS&T Transactions(12)

         Support Obligations Relating to Obligations

         Aggregate amount of Support Obligations provided by the Borrower in
         respect of MS&T's obligations under any Covering Transaction

                  (a)  [List each such Support Obligation]             $________
                  (b)                                                  $________
                  (c)                                                  $________
                  (d)                                                  $________

         Less:

         Aggregate amount of any Support Obligations provided by any
         Counterparty Guarantor or any irrevocable letter of credit issued for
         the account of any Counterparty or Counterparty Guarantor

                  (a)   [List each such Support Obligation or
                       letter of credit that relates to the
                       corresponding subsection above]                 $________
                  (b)                                                  $________
                  (c)                                                  $________
                  (d)                                                  $________




- --------
(12)  See subsection (d) of the definition of "Consolidated Debt" contained in
the Credit Agreement for the specific requirements of any offsetting Support
Obligations.

   91
                                                                       EXHIBIT G


                            FORM OF LENDER ASSIGNMENT


                             Dated _______ ___, ____

                  Reference is made to the Credit Agreement, dated as of June
27, 2000 (said Agreement, as it may hereafter be amended or otherwise modified
from time to time, being the "CREDIT AGREEMENT"), the terms defined therein and
not otherwise defined herein being used herein as therein defined), among the
Borrower, the Lenders named therein, The Chase Manhattan Bank, as Administrative
Agent and as Collateral Agent, Bank of America, N.A. and Barclays Bank plc, as
Co-Syndication Agents, and Citibank, N.A. as Documentation Agent. Pursuant to
the Credit Agreement, ________________ (the "ASSIGNOR") has committed to make
loans ("LOANS") to the Borrower[, which Loans are evidenced by a promissory note
(the "NOTE") issued by the Borrower to the Assignor].

                  The Assignor and ________________ (the "ASSIGNEE") agree as
follows:

                  1. The Assignor hereby sells and assigns to the Assignee, and
the Assignee hereby purchases and assumes from the Assignor, that interest in
and to all of the Assignor's rights and obligations under the Credit Agreement
as of the date hereof which represents the percentage interest specified on
Schedule 1 of all outstanding rights and obligations under the Credit Agreement
(the "ASSIGNED INTEREST"), including, without limitation, such interest in the
Assignor's Commitment[,] [and] the Loans owing to the Assignor [and the Note
held by the Assignor]. After giving effect to such sale and assignment, the
Assignee's Commitments and the amount of the Loans owing to the Assignee in the
aggregate will be as set forth in Section 2 of Schedule 1. The effective date of
this sale and assignment shall be the date specified in Section 3 of Schedule 1
(the "EFFECTIVE DATE").

                  2. On ____________ ___, 20___, the Assignee will pay to the
Assignor, in same day funds, at such address and account as the Assignor shall
advise the Assignee, $____________, and (subject to the satisfaction of the
requirements set forth in Section 11.07(d) of the Credit Agreement) the sale and
assignment contemplated hereby shall thereupon become effective as of the
Effective Date. From and after the Effective Date, the Assignor agrees that the
Assignee shall be entitled to all rights, powers and privileges of the Assignor
under the Credit Agreement [and the Note] to the extent of the Assigned
Interest, including without limitation (i) the right to receive all payments in
respect of the Assigned Interest for the period from and after the Effective
Date, whether on account of principal, interest, fees, indemnities in respect of
claims arising after the Effective Date, increased costs, additional amounts or
otherwise, (ii) the right to vote and to instruct the Agents under the Credit
Agreement according to its Percentage based on the Assigned Interest, (iii) the
right to set-off and to appropriate and apply deposits of the Borrower as set
forth in the Credit Agreement and (iv) the right to receive notices, requests,
demands and other communications. The Assignor agrees that it will promptly
remit to the Assignee any amount received by it in respect of the Assigned
Interest (whether from the Borrower, any Agent or otherwise) in the same funds
in which such amount is received by the Assignor.


   92

                  3. The Assignor (i) represents and warrants that it is the
legal and beneficial owner of the interest being assigned by it hereunder and
that such interest is free and clear of any adverse claim; (ii) makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with the
Credit Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Agreement or any other
instrument or document furnished pursuant thereto; (iii) makes no representation
or warranty and assumes no responsibility with respect to the financial
condition of the Borrower or the performance or observance by the Borrower of
any of its obligations under the Credit Agreement or any other instrument or
document furnished pursuant thereto; and (iv) represents and warrants to the
Assignee and the Administrative Agent that it has duly executed and delivered
this Assignment and that the execution, delivery and performance by the Assignor
of this Assignment have been duly authorized by all necessary action (corporate
or otherwise). Except as specified in this Section 3, the assignment of the
Assigned Interest contemplated hereby shall be without recourse to the Assignor.

                  4. The Assignee (i) confirms that it has received a copy of
the Credit Agreement, together with copies of the financial statements referred
to in Section 7.01(e)(i) thereof and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and purchase the Assigned Interest, (ii) agrees that it
will, independently and without reliance upon the Assignor and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement, (iii) confirms that it satisfies the requirements of an Eligible
Assignee, (iv) appoints and authorizes each Agent to take such action as agent
on its behalf and to exercise such powers under the Loan Documents as are
delegated to each Agent by the terms thereof, together with such powers as are
reasonably incidental thereto, (v) agrees that it will perform in accordance
with their terms all of the obligations which by the terms of the Loan Documents
are required to be performed by it as a Lender and (vi) represents and warrants
to the Assignor and the Administrative Agent that it has duly executed and
delivered this Assignment and that the execution, delivery and performance by
the Assignor of this Assignment have been duly authorized by all necessary
action (corporate or otherwise).

                  5. This Assignment may be executed in any number of
counterparts and by different parties in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute but one and the same instrument.

                  6.       This  Assignment  shall be governed by, and
construed in accordance  with,  the laws of the State of New York.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Assignment to be executed by their respective officers thereunto duly
authorized, as of the date first above written, such execution being made on
Schedule 1 hereto.





   93

                                   Schedule 1
                                       to
                              Assignment Agreement
                          Dated ____________ ___, 20___

Section 1.
         Percentage Interest:                               ______%

Section 2.
         Assignee's Commitment:                             $__________

         Aggregate Outstanding Principal Amount of
         Loans owing to the Assignee:                       $__________

Section 3.
         Effective Date:                                  ________ ___, 20___

                                     [NAME OF ASSIGNOR]

                                     By:________________________________________
                                        Name:
                                        Title:

                                     [NAME OF ASSIGNEE]

                                     By ________________________________________
                                        Name:
                                        Title:

Consented to

CMS ENERGY CORPORATION(13)

By:____________________________
   Name:
   Title:

THE CHASE MANHATTAN BANK,
  as Administrative Agent

By:____________________________
   Name:
   Title:


- --------
(13) Consent of the Borrower and the Administrative Agent is required for all
assignments except for any assignment by a Lender to any of its Affiliates or to
any other Lender or any of its Affiliates.

   94
                                                                       EXHIBIT H


                             TERMS OF SUBORDINATION
                           (Junior Subordinated Debt)


                                  ARTICLE ____

                                  SUBORDINATION

                  Section ___.1 Applicability of Article; Securities
Subordinated to Senior Indebtedness. (a) This Article ____ shall apply only to
the Securities of any series which, pursuant to Section ___, are expressly made
subject to this Article. Such Securities are referred to in this Article ____ as
"Subordinated Securities."

                  (b) The Issuer covenants and agrees, and each Holder of
Subordinated Securities by his acceptance thereof likewise covenants and agrees,
that the indebtedness represented by the Subordinated Securities and the payment
of the principal and interest, if any, on the Subordinated Securities is
subordinated and subject in right, to the extent and in the manner provided in
this Article, to the prior payment in full of all Senior Indebtedness.

                  "Senior Indebtedness" means the principal of and premium, if
any, and interest on the following, whether outstanding on the date hereof or
thereafter incurred, created or assumed: (i) indebtedness of the Issuer for
money borrowed by the Issuer (including purchase money obligations) or evidenced
by debentures (other than the Subordinated Securities), notes, bankers'
acceptances or other corporate debt securities, or similar instruments issued by
the Issuer; (ii) all capital lease obligations of the Issuer; (iii) all
obligations of the Issuer issued or assumed as the deferred purchase price of
property, all conditional sale obligations of the Issuer and all obligations of
the Issuer under any title retention agreement (but excluding trade accounts
payable arising in the ordinary course of business); (iv) obligations with
respect to letters of credit; (v) all indebtedness of others of the type
referred to in the preceding clauses (i) through (iv) assumed by or guaranteed
in any manner by the Issuer or in effect guaranteed by the Issuer; (vi) all
obligations of the type referred to in clauses (i) through (v) above of other
persons secured by any lien on any property or asset of the Issuer (whether or
not such obligation is assumed by the Issuer), except for (1) any such
indebtedness that is by its terms subordinated to or pari passu with the
Subordinated Notes, as the case may be, including all other debt securities and
guaranties in respect of those debt securities, issued to any other trusts,
partnerships or other entities affiliated with the Issuer which act as a
financing vehicle of the Issuer in connection with the issuance of preferred
securities by such entity or other securities which rank pari passu with, or
junior to, the Preferred Securities, and (2) any indebtedness between or among
the Issuer and its affiliates; and/or (vii) renewals, extensions or refundings
of any of the indebtedness referred to in the preceding clauses unless, in the
case of any particular indebtedness, renewal, extension or refunding, under the
express provisions of the instrument creating or evidencing the same or the
assumption or guarantee of the same, or pursuant to which the same is
outstanding, such indebtedness or such renewal, extension or refunding thereof
is not superior in right of payment to the Subordinated Securities.


   95

                  This Article shall constitute a continuing obligation to all
Persons who, in reliance upon such provisions become holders of, or continue to
hold, Senior Indebtedness, and such provisions are made for the benefit of the
holders of Senior Indebtedness, and such holders are made obligees hereunder and
they and/or each of them may enforce such provisions.

                  Section ___.2 Issuer Not to Make Payments with Respect to
Subordinated Securities in Certain Circumstances. (a) Upon the maturity of any
Senior Indebtedness by lapse of time, acceleration or otherwise, all principal
thereof and premium and interest thereon shall first be paid in full, or such
payment duly provided for in cash in a manner satisfactory to the holders of
such Senior Indebtedness, before any payment is made on account of the principal
of, or interest on, Subordinated Securities or to acquire any Subordinated
Securities or on account of any sinking fund provisions of any Subordinated
Securities (except payments made in capital stock of the Issuer or in warrants,
rights or options to purchase or acquire capital stock of the Issuer, sinking
fund payments made in Subordinated Securities acquired by the Issuer before the
maturity of such Senior Indebtedness, and payments made through the exchange of
other debt obligations of the Issuer for such Subordinated Securities in
accordance with the terms of such Subordinated Securities, provided that such
debt obligations are subordinated to Senior Indebtedness at least to the extent
that the Subordinated Securities for which they are exchanged are so
subordinated pursuant to this Article ____).

                  (b) Upon the happening and during the continuation of any
default in payment of the principal of, or interest on, any Senior Indebtedness
when the same becomes due and payable or in the event any judicial proceeding
shall be pending with respect to any such default, then, unless and until such
default shall have been cured or waived or shall have ceased to exist, no
payment shall be made by the Issuer with respect to the principal of, or
interest on, Subordinated Securities or to acquire any Subordinated Securities
or on account of any sinking fund provisions of Subordinated Securities (except
payments made in capital stock of the Issuer or in warrants, rights, or options
to purchase or acquire capital stock of the Issuer, sinking fund payments made
in Subordinated Securities acquired by the Issuer before such default and notice
thereof, and payments made through the exchange of other debt obligations of the
Issuer for such Subordinated Securities in accordance with the terms of such
Subordinated Securities, provided that such debt obligations are subordinated to
Senior Indebtedness at least to the extent that the Subordinated Securities for
which they are exchanged are so subordinated pursuant to this Article ____).

                  (c) In the event that, notwithstanding the provisions of this
Section ___.2, the Issuer shall make any payment to the Trustee on account of
the principal of or interest on Subordinated Securities, or on account of any
sinking fund provisions of such Securities, after the maturity of any Senior
Indebtedness as described in Section ___.2(a) above or after the happening of a
default in payment of the principal of or interest on any Senior Indebtedness as
described in Section ___.2(b) above, then, unless and until all Senior
Indebtedness which shall have matured, and all premium and interest thereon,
shall have been paid in full (or the declaration of acceleration thereof shall
have been rescinded or annulled), or such default shall have been cured or
waived or shall have ceased to exist, such payment (subject to the provisions of
Sections ___.6 and ___.7) shall be held by the Trustee, in trust for the benefit
of, and shall be paid forthwith over and delivered to, the holders of such
Senior Indebtedness (pro rata as to each of such holders on the basis of the
respective amounts of Senior Indebtedness held by them) or



   96

their representative or the trustee under the indenture or other agreement (if
any) pursuant to which such Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all such
Senior Indebtedness remaining unpaid to the extent necessary to pay the same in
full in accordance with its terms, after giving effect to any concurrent payment
or distribution to or for the holders of Senior Indebtedness. The Issuer shall
give prompt written notice to the Trustee of any default in the payment of
principal of or interest on any Senior Indebtedness.

                  Section ___.3 Subordinated Securities Subordinated to Prior
Payment of All Senior Indebtedness on Dissolution, Liquidation or Reorganization
of Issuer. Upon any distribution of assets of the Issuer in any dissolution,
winding up, liquidation or reorganization of the Issuer (whether voluntary or
involuntary, in bankruptcy, insolvency or receivership proceedings or upon an
assignment for the benefit of creditors or otherwise):

                  (a) the holders of all Senior Indebtedness shall first be
         entitled to receive payments in full of the principal thereof and
         premium and interest due thereon, or provision shall be made for such
         payment, before the Holders of Subordinated Securities are entitled to
         receive any payment on account of the principal of or interest on such
         Securities;

                  (b) any payment or distribution of assets of the Issuer of any
         kind or character, whether in cash, property or securities (other than
         securities of the Issuer as reorganized or readjusted or securities of
         the Issuer or any other corporation provided for by a plan of
         reorganization or readjustment the payment of which is subordinate, at
         least to the extent provided in this Article ____ with respect to
         Subordinated Securities, to the payment in full without diminution or
         modification by such plan of all Senior Indebtedness), to which the
         Holders of Subordinated Securities or the Trustee on behalf of the
         Holders of Subordinated Securities would be entitled except for the
         provisions of this Article ____ shall be paid or delivered by the
         liquidating trustee or agent or other person making such payment or
         distribution directly to the holders of Senior Indebtedness or their
         representative, or to the trustee under any indenture under which
         Senior Indebtedness may have been issued (pro rata as to each such
         holder, representative or trustee on the basis of the respective
         amounts of unpaid Senior Indebtedness held or represented by each), to
         the extent necessary to make payment in full of all Senior Indebtedness
         remaining unpaid, after giving effect to any concurrent payment or
         distribution or provision thereof to the holders of such Senior
         Indebtedness; and

                  (c) in the event that notwithstanding the foregoing provisions
         of this Section ___.3, any payment or distribution of assets of the
         Issuer of any kind or character, whether in cash, property or
         securities (other than securities of the Issuer as reorganized or
         readjusted or securities of the Issuer or any other corporation
         provided for by a plan of reorganization or readjustment the payment of
         which is subordinate, at least to the extent provided in this Article
         ____ with respect to Subordinated Securities, to the payment in full
         without diminution or modification by such plan of all Senior
         Indebtedness), shall be received by the Trustee or the Holders of the
         Subordinated Securities on account of principal of or interest on the
         Subordinated Securities before all Senior Indebtedness is paid in full,
         or effective provision made for its payment, such payment or
         distribution


   97
         (subject to the provisions of Section ___.6 and ___.7) shall be
         received and held in trust for and shall be paid over to the holders of
         the Senior Indebtedness remaining unpaid or unprovided for or their
         representative, or to the trustee under any indenture under which such
         Senior Indebtedness may have been issued (pro rata as provided in
         subsection (b) above), for application to the payment of such Senior
         Indebtedness until all such Senior Indebtedness shall have been paid in
         full, after giving effect to any concurrent payment or distribution or
         provision therefor to the holders of such Senior Indebtedness.

                  The Issuer shall give prompt written notice to the Trustee of
any dissolution, winding up, liquidation or reorganization of the Issuer.

                  The consolidation of the Issuer with, or the merger of the
Issuer into, another corporation or the liquidation or dissolution of the Issuer
following the conveyance or transfer of its property as an entirety, or
substantially as an entirety, to another corporation upon the terms and
conditions provided for in Article ____ hereof shall not be deemed a
dissolution, winding up, liquidation or reorganization for the purposes of this
Section ___.3 if such other corporation shall, as a part of such consolidation,
merger, conveyance or transfer, comply with the conditions stated such in
Article ____.

                  Section ___.4 Holders of Subordinated Securities to be
Subrogated to Right of Holders of Senior Indebtedness. Subject to the payment in
full of all Senior Indebtedness, the Holders of Subordinated Securities shall be
subrogated to the rights of the holders of Senior Indebtedness to receive
payments or distributions of assets of the Issuer applicable to the Senior
Indebtedness until all amounts owing on Subordinated Securities shall be paid in
full, and for the purposes of such subrogation no payments or distributions to
the holders of the Senior Indebtedness by or on behalf of the Issuer or by or on
behalf of the Holders of Subordinated Securities by virtue of this Article ____
which otherwise would have been made to the Holders of Subordinated Securities
shall, as between the Issuer, its creditors other than holders of Senior
Indebtedness and the Holders of Subordinated Securities, be deemed to be payment
by the Issuer to or on account of the Senior Indebtedness, it being understood
that the provisions of this Article ____ are and are intended solely for the
purpose of defining the relative rights of the Holders of the Subordinated
Securities, on the one hand, and the holders of the Senior Indebtedness, on the
other hand.

                  Section ___.5 Obligation of the Issuer Unconditional. Nothing
contained in this Article ____ or elsewhere in this Indenture or in any
Subordinated Security is intended to or shall impair, as among the Issuer, its
creditors other than holders of Senior Indebtedness and the Holders of
Subordinated Securities, the obligation of the Issuer, which is absolute and
unconditional, to pay to the Holders of Subordinated Securities the principal
of, and interest on, Subordinated Securities as and when the same shall become
due and payable in accordance with their terms, or is intended to or shall
affect the relative rights of the Holders of Subordinated Securities and
creditors of the Issuer other than the holders of the Senior Indebtedness, nor
shall anything herein or therein prevent the Trustee or the Holder of any
Subordinated Security from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article ____ of the holders of Senior Indebtedness in respect of
cash, property or securities of the Issuer received upon the exercise of any
such remedy. Upon any payment or distribution of assets of the Issuer referred
to in this Article ____,



   98

the Trustee and Holders of Subordinated Securities shall be entitled to rely
upon any order or decree made by any court of competent jurisdiction in which
such dissolution, winding up, liquidation or reorganization proceedings are
pending, or, subject to the provisions of Section ___ and ___, a certificate of
the receiver, trustee in bankruptcy, liquidating trustee or agent or other
Person making such payment or distribution to the Trustee or the Holders of
Subordinated Securities, for the purposes of ascertaining the Persons entitled
to participate in such distribution, the holders of the Senior Indebtedness and
other indebtedness of the Issuer, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article ____.

                  Nothing contained in this Article ____ or elsewhere in this
Indenture or in any Subordinated Security is intended to or shall affect the
obligation of the Issuer to make, or prevent the Issuer from making, at any time
except during the pendency of any dissolution, winding up, liquidation or
reorganization proceeding, and, except as provided in subsections (a) and (b) of
Section ___.2, payments at any time of the principal of, or interest on,
Subordinated Securities.

                  Section ___.6 Trustee Entitled to Assume Payments Not
Prohibited in Absence of Notice. The Issuer shall give prompt written notice to
the Trustee of any fact known to the Issuer which would prohibit the making of
any payment or distribution to or by the Trustee in respect of the Subordinated
Securities. Notwithstanding the provisions of this Article ____ or any provision
of this Indenture, the Trustee shall not at any time be charged with knowledge
of the existence of any facts which would prohibit the making of any payment or
distribution to or by the Trustee, unless at least two Business Days prior to
the making of any such payment, the Trustee shall have received written notice
thereof from the Issuer or from one or more holders of Senior Indebtedness or
from any representative thereof or from any trustee therefor, together with
proof satisfactory to the Trustee of such holding of Senior Indebtedness or of
the authority of such representative or trustee; and, prior to the receipt of
any such written notice, the Trustee, subject to the provisions of Sections ___
and ___, shall be entitled to assume conclusively that no such facts exist. The
Trustee shall be entitled to rely on the delivery to it of a written notice by a
Person representing himself to be a holder of Senior Indebtedness (or a
representative or trustee on behalf of the holder) to establish that such notice
has been given by a holder of Senior Indebtedness (or a representative of or
trustee on behalf of any such holder). In the event that the Trustee determines,
in good faith, that further evidence is required with respect to the right of
any Person as a holder of Senior Indebtedness to participate in any payments or
distribution pursuant of this Article ____, the Trustee may request such Person
to furnish evidence to the reasonable satisfaction of the Trustee as to the
amount of Senior Indebtedness held by such Person, as to the extent to which
such Person is entitled to participate in such payment or distribution, and as
to other facts pertinent to the rights of such Person under this Article ____,
and if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment. The Trustee, however, shall not be deemed to owe any fiduciary
duty to the holders of Senior Indebtedness and nothing in this Article ____
shall apply to claims of, or payments to, the Trustee under or pursuant to
Section ___.

                  Section ___.7 Application by Trustee of Monies or Government
Obligations Deposited with It. Money or Government Obligations deposited in
trust with the Trustee


   99

pursuant to and in accordance with Section ____ shall be for the sole benefit of
Securityholders and, to the extent allocated for the payment of Subordinated
Securities, shall not be subject to the subordination provisions of this Article
____, if the same are deposited in trust prior to the happening of any event
specified in Section ___.2. Otherwise, any deposit of monies or Government
Obligations by the Issuer with the Trustee or any paying agent (whether or not
in trust) for the payment of the principal of, or interest on, any Subordinated
Securities shall be subject to the provisions of Section ___.1, ___.2 and ___.3
except that, if prior to the date on which by the terms of this Indenture any
such monies may become payable for any purposes (including, without limitation,
the payment of the principal of, or the interest, if any, on any Subordinated
Security) the Trustee shall not have received with respect to such monies the
notice provided for in Section ___.6, then the Trustee or the paying agent shall
have full power and authority to receive such monies and Government Obligations
and to apply the same to the purpose for which they were received, and shall not
be affected by any notice to the contrary which may be received by it on or
after such date. This Section ___.7 shall be construed solely for the benefit of
the Trustee and paying agent and, as to the first sentence hereof, the
Securityholders, and shall not otherwise effect the rights of holders of Senior
Indebtedness.

                  Section ___.8 Subordination Rights Not Impaired by Acts or
Omissions of Issuer or Holders of Senior Indebtedness. No rights of any present
or future holders of any Senior Indebtedness to enforce subordination as
provided herein shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Issuer or by any act or failure to act,
in good faith, by any such holders or by any noncompliance by the Issuer with
the terms of this Indenture, regardless of any knowledge thereof which any such
holder may have or be otherwise charged with.

                  Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness of the Issuer may, at any time and
from time to time, without the consent of or notice to the Trustee or the
Holders of the Subordinated Securities, without incurring responsibility to the
Holders of the Subordinated Securities and without impairing or releasing the
subordination provided in this Article ____ or the obligations hereunder of the
Holders of the Subordinated Securities to the holders of such Senior
Indebtedness, do any one or more of the following: (i) change the manner, place
or terms of payment or extend the time of payment of, or renew or alter, such
Senior Indebtedness, or otherwise amend or supplement in any manner such Senior
Indebtedness or any instrument evidencing the same or any agreement under which
such Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing such
Senior Indebtedness; (iii) release any Person liable in any manner for the
collection for such Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Issuer, as the case may be, and any other
Person.

                  Section ___.9 Securityholders Authorize Trustee to Effectuate
Subordination of Securities. Each Holder of Subordinated Securities by his
acceptance thereof authorizes and expressly directs the Trustee on his behalf to
take such action as may be necessary or appropriate to effectuate the
subordination provided in this Article ____ and appoints the Trustee his
attorney-in-fact for such purpose, including in the event of any dissolution,
winding up, liquidation or reorganization of the Issuer (whether in bankruptcy,
insolvency or receivership proceedings or upon an assignment for the benefit of
creditors or otherwise) the immediate filing of a claim for the unpaid balance
of his Subordinated Securities in the form required in said



   100

proceedings and causing said claim to be approved. If the Trustee does not file
a proper claim or proof of debt in the form required in such proceeding prior to
30 days before the expiration of the time to file such claim or claims, then the
holders of Senior Indebtedness have the right to file and are hereby authorized
to file an appropriate claim for and on behalf of the Holders of said
Securities.

                  Section ___.10 Right of Trustee to Hold Senior Indebtedness.
The Trustee in its individual capacity shall be entitled to all of the rights
set forth in this Article ____ in respect of any Senior Indebtedness at any time
held by it to the same extent as any other holder of Senior Indebtedness, and
nothing in this Indenture shall be construed to deprive the Trustee of any of
its rights as such holder.

                  With respect to the holders of Senior Indebtedness of the
Issuer, the Trustee undertakes to perform or to observe only such of its
covenants and obligations as are specifically set forth in this Article ____,
and no implied covenants or obligations with respect to the holders of such
Senior Indebtedness shall be read into this Indenture against the Trustee. The
Trustee shall not be deemed to owe any fiduciary duty to the holders of such
Senior Indebtedness and, subject to the provisions of Sections ___.2 and ___.3,
the Trustee shall not be liable to any holder of such Senior Indebtedness if it
shall pay over or deliver to Holders of Subordinated Securities, the Issuer or
any other Person money or assets to which any holder of such Senior Indebtedness
shall be entitled by virtue of this Article ____ or otherwise.

                  Section ___.11 Article ____ Not to Prevent Events of Defaults.
The failure to make a payment on account of principal or interest by reason of
any provision in this Article ____ shall not be construed as preventing the
occurrence of an Event of Default under Section ____.



   101
                                                                       EXHIBIT I


                             TERMS OF SUBORDINATION
                    (Guaranty of Hybrid Preferred Securities)


                  SECTION ___. This Guarantee will constitute an unsecured
obligation of the Guarantor and will rank subordinate and junior in right of
payment to all other liabilities of the Guarantor and pari passu with any
guarantee now or hereafter entered into by the Guarantor in respect of the
securities representing common beneficial interests in the assets of the Issuer
or of any preferred or preference stock of any affiliate of the Guarantor.

   1
                                                                    EXHIBIT (12)
                             CMS ENERGY CORPORATION
                Ratio of Earnings to Fixed Charges and Preferred
                     Securities Dividends and Distributions
                              (Millions of Dollars)




                                                        Six Months
                                                          Ended                    Years Ended December 31 -
                                                     June 30, 2000     1999      1998      1997       1996       1995
                                                    ------------------------------------------------------------------
                                                                                  (b)
                                                                                              

Earnings as defined (a)
Consolidated net income                                   $ 161      $ 277      $ 242     $ 244      $ 224      $ 195
Income taxes                                                 68         64        100       108        137        113
Exclude equity basis subsidiaries                          (101)       (84)       (92)      (80)       (85)       (57)
Fixed charges as defined, adjusted to
  exclude capitalized interest of $21, $42, $28,
  $13, $5 and $4 million for the six months ended
  June 30, 2000 and for the years ended December
  31, 1999, 1998, 1997, 1996 and 1995,
  respectively                                              360        395        395       360        313        299
                                                          -----------------------------------------------------------

Earnings as defined                                       $ 488      $ 845      $ 645     $ 632      $ 589      $ 550
                                                          ===========================================================


Fixed charges as defined (a)
Interest on long-term debt                                $ 291      $ 507      $ 319     $ 273      $ 230      $ 224
Estimated interest portion of lease rental                    4          7          8         8         10          9
Other interest charges                                       11         57         48        49         43         42
Preferred securities dividends and
  distributions                                              74         96         77        67         54         42
                                                          -----------------------------------------------------------
Fixed charges as defined                                  $ 380      $ 662      $ 452     $ 397      $ 337      $ 317
                                                          ===========================================================

Ratio of earnings to fixed charges and
 preferred securities dividends and distributions          1.28       1.28       1.43      1.59       1.75       1.74
                                                          ===========================================================




NOTES:
(a) Earnings and fixed charges as defined in instructions for Item 503 of
    Regulation S-K.

(b) Excludes a cumulative effect of change in accounting after-tax gain of $43
    million.

   1
                                                                EXHIBIT (15)(a)





July 28, 2000



CMS Energy Corporation:

We are aware that CMS Energy Corporation has incorporated by reference in its
Registration Statements No. 33-60007, No. 33-61595, No. 33-62573, No. 333-32229,
No. 333-60795, No. 333-63229, No. 333-68937 and No. 333-76347 its Form 10-Q for
the quarter ended June 30, 2000, which includes our report dated July 28, 2000
covering the unaudited interim financial information contained therein. Pursuant
to Regulation C of the Securities Act of 1933, that report is not considered a
part of the registration statement prepared or certified by our firm or a report
prepared or certified by our firm within the meaning of Sections 7 and 11 of the
Act.


Very truly yours,



/s/ Arthur Andersen LLP

   1
                                                                EXHIBIT (15)(b)





July 28, 2000


Consumers Energy Company:

We are aware that Consumers Energy Company has incorporated by reference in its
Registration Statements No. 333-89363 its Form 10-Q for the quarter ended June
30, 2000, which includes our report dated July 28, 2000 covering the unaudited
interim financial information contained therein. Pursuant to Regulation C of the
Securities Act of 1933, that report is not considered a part of the registration
statement prepared or certified by our firm or a report prepared or certified by
our firm within the meaning of Sections 7 and 11 of the Act.


Very truly yours,


/s/ Arthur Andersen LLP

 

 UT

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS, BALANCE SHEET, AND STATEMENT OF
COMMON STOCKHOLDERS' EQUITY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.

 0000811156
 CMS ENERGY CORPORATION
 1,000,000

                             
                   6-MOS
                          DEC-31-2000
                             JAN-01-2000
                               JUN-30-2000
                                  PER-BOOK
                        4,097
                      5,931
                           1,944
                         3,735
                                       0
                                  15,707
                                             1
                        2,626
                              (110)
                   2,345
                            1,119
                                         44
                             1,527
                                 278
                        5,391
                       0
                      514
                            0
                        197
                                    33
                   4,087
                   15,707
                        3,426
                                68
                       2,928
                       2,996
                            430
                                  61
                     491
                           282
                                       209
                         48
                      161
                            82
                            0
                             183
                                       1.44
                                     1.42

 

 UT

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS, BALANCE SHEET, AND STATEMENT OF
COMMON STOCKHOLDER'S EQUITY, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.

 0000201533
 CONSUMERS ENERGY COMPANY
 1,000,000

                             
                   6-MOS
                          DEC-31-2000
                             JAN-01-2000
                               JUN-30-2000
                                  PER-BOOK
                        4,097
                        637
                             518
                         1,786
                                       0
                                   7,038
                                           841
                          645
                                485
                   1,971
                              395
                                         44
                               808
                                 275
                        1,200
                       0
                       55
                            0
                         85
                                    31
                   2,174
                    7,038
                        1,934
                                69
                       1,655
                       1,724
                            210
                                   5
                     215
                            87
                                       128
                         19
                      109
                           109
                            0
                             367
                                          0
                                        0

 

 5

THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PANHANDLE EASTERN PIPE LINE COMPANY QUARTERLY REPORT ON FORM 10-Q FOR THE YEAR
ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.

 0000076063
 PANHANDLE EASTERN PIPE LINE COMPANY
 1,000

                             
                   6-MOS
                          JUN-30-2000
                               JUN-30-2000
                                          15,000
                                         0
                                  106,000
                                         0
                                     70,000
                               381,000
                                       1,653,000
                                  76,000
                               2,740,000
                          254,000
                                      1,193,000
                                0
                                          0
                                         1,000
                                   1,129,000
                 2,740,000
                                              0
                               241,000
                                                0
                                   93,000
                                44,000
                                     0
                              41,000
                                104,000
                                    25,000
                             41,000
                                       0
                                      0
                                            0
                                    41,000
                                          0
                                        0

Not meaningful since Panhandle Eastern Pipe Line Company is a wholly-owned
subsidiary.