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DTE, MCN Propose Merger Solution

DTE, MCN Propose Merger Solution

To resolve concerns raised by the Federal Trade Commission over the proposed merger of DTE Energy and MCN Energy, MCN has agreed to transfer a property interest to a unit of Unicom Corp. that would allow for the use of up to 20 Bcf of natural gas transportation capacity annually on MCN's Michigan Consolidated Gas Co. system in the relevant distribution area.

DTE and MCN, both based in Michigan, announced the proposal last week to address FTC's related review of the companies' proposed merger, which was first announced in October 1999 (see NGI, Oct. 11, 1999). FTC staff is now reviewing the impact of the proposal. If approved, DTE would become the largest energy utility in Michigan.

When the merger is completed, the new DTE will have approximately 11,500 employees, serving 2.1 million electric customers and 1.2 million natural gas customers in Michigan. It will have an energy portfolio consisting of more than 11,000 MW of generating capacity, 600 Bcf/year of natural gas deliveries and 185 Bcf of natural gas storage capacity, with assets totaling more than $17 billion and annual revenues exceeding $6 billion. DTE will also gain MCN's 25% interest in the Vector Pipeline project, 10.5% interest in the Millennium Pipeline project and 23% interest in the Portland Natural Gas Transmission System Pipeline project.

It's intrastate rival, CMS' Consumer's Energy, has 1.6 million electric customers and 1.5 million gas customers. Overall, CMS Corp. has annual sales of about $6 billion and assets of about $14 billion.

DTE's principal operating subsidiary is Detroit Edison, which serves more than 2.1 million customers in the southeastern part of the state. MCN's largest subsidiary is MichCon, serving 1.2 million customers in more than 500 communities in the state.

FTC staff is concerned about the possible loss of competition between DTE's Detroit Edison and MCN's MichCon utility subsidiaries in their coincident retail distribution areas. The agreement is still subject to regulatory approval. DTE and MCN began discussions with FTC staff last November as part of the agency's review of the merger under the Hart-Scott-Rodino Act.

Unicom currently markets natural gas to customers in the Detroit area and has initiatives under way to participate as demand for distributed generation technologies develop in the state.

Anthony F. Earley Jr., CEO of DTE, said he believes that the new proposal should suit FTC concerns. "While we can't predict the timing or outcome of FTC's investigation, it remains our objective to close this merger in the fourth quarter."

Carolyn Davis, Houston

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