CONSUMERS NETS MIDLAND PARTNERS

CONSUMERS NETS MIDLAND PARTNERS

Consumers Power Co. said it was very demanding on companies vying to be suppliers for the Midland cogeneration project.

Since we were in such poor shape financially, we needed to develop a project structure that required a minimum of cash from the company, said John W. Clark, Consumers' senior vice president.The strategy was to attract equity partners who would have a vested interest in Midland, he told a symposium on energy alternatives to oil sponsored by the U.S. Department of Energy's Argonne National Laboratory.

Consumers, based in Jackson, Mich., is the state's largest utility, serving 6 million people.

In short, our basic strategy has been to require those who hoped to sell products or services to the project to invest in it, he added.

In an interview, Mr. Clark acknowledged the policy was unusual and was met with some resistance.

These were all very big, very established companies that obviously had been very successful for a long period of time, he said.

They were very accustomed to certain business practices . . . We were simply insistent, he added.

The Midland gas-fired, combined-cycle cogeneration plant will produce up to 1,370 megawatts of electricity and 1.35 million pounds of steam an hour for industrial use when it comes on line in 1990.

Midland was started 20 years ago as a nuclear cogeneration plant. Costs reached $4 billion, or 40 percent of the company's total assets, before a decision was made, amid questions over the quality of the construction work, to convert the plant to burn natural gas.

To date, seven companies have joined in the Midland project, contributing $360 million in cash equity. They are subsidiaries of Asea Brown Boveri, CMS Energy Corp. - Consumers' parent company - Coastal Corp., Combustion Engineering, Dow Chemical Co., Fluor Corp. and Panhandle Eastern Corp.

Mr. Clark said Consumers hopes that the Midland project, along with several other smaller cogeneration operations, will help to re-establish our generating reserve back to the 22 percent to 23 percent level.

He told the meeting that Midland's reserve capacity margin stands at about 13 percent, or half of what state regulators say is prudent.

Mr. Clark also said that if natural gas prices increase significantly, the Midland plant could be retrofitted to gasify coal, most likely using technology that Dow Chemical has perfected.

Consumers already has negotiated for 80 percent of the natural gas it needs through 1990 and more than 60 percent of its requirements in 1994.