New DTE Energy Rtgs Established By Fitch; Exp MCN Rtgs Discussed.

Business Editors

NEW YORK--(BUSINESS WIRE)--Feb. 2, 2001

Fitch has established new ratings for the DTE Energy Company (DTE) and affirmed ratings for DTE's largest subsidiary, the Detroit Edison Company. The rating actions anticipate the merger of DTE and MCN Energy Group Inc. (MCN). Fitch assigned its `F2' short-term credit rating to DTE's new $400 million 4(2) commercial paper program. Fitch also assigned a long-term rating of `BBB+' to implied senior unsecured debt and counterparty credit of DTE Energy. The Rating Outlook is Positive. DTE is the parent of Detroit Edison , a regulated electric utility serving southeastern Michigan. The new commercial paper program will initially be used to assume short-term debt incurred at DTE Capital Corporation and to fund DTE's non-regulated business activities as well as for general corporate purposes, and is expected to be increased to fund the acquisition of MCN.

Fitch also assigned a `BBB+' rating to two issues (aggregating $400 million) of remarketed notes issued by DTE Capital Corporation, a funding subsidiary of DTE, credit enhanced by a strong support agreement from DTE. DTE intends to consolidate DTE Capital into DTE and assume these obligations shortly in advance of DTE's expected merger with MCN.

At the same time, Fitch affirmed the credit ratings of Detroit Edison and changed the Rating Outlook from Stable to Positive. The ratings affirmed are:

Detroit Edison Co.:

--Secured mtge bond & sec pollution control rev bond rtgs `A-';

--Senior unsecured debt `BBB+';

--Preferred stock and quarterly income sub debentures `BBB';

--Commercial paper `F2'.

The Positive Rating Outlook for Detroit Edison relates to the satisfactory resolution of electric utility direct access and stranded asset recovery in Michigan. Michigan adopted a restructuring plan that permits utility customers to opt for direct access competition, allows the company to continue to operate as an integrated electric utility, and provides the utility with a mechanism for stranded cost recovery. Overall, the Michigan framework is conservative and focused upon maintaining continuity of reliable power supply. Detroit Edison will have modest risk as a result of a tariff freeze on tariffs at least through the middle of 2003. But this price risk is mitigated by the relatively stable cost of power from Detroit Edison's coal and nuclear generating fleet and power contracts to hedge additional supply requirements. The utility has secured purchase power contracts for the 2001 capacity requirements in excess of its own generating capability at prices below the frozen power supply cost recovery tariff component, and will continue to monitor and adjust its residual exposure for 2002-03. The utility has further mitigated price and supply risk relating to any major unscheduled outage of the Fermi nuclear plant via an insurance program. Roughly one-third of energy sales and 28% of utility revenues are derived from industrial customers, with a revenue concentration in the auto sector and related industries. While an auto industry slow-down and a soft economy could have some adverse impact on sales and revenues in southern Michigan, the potential impact is fully encompassed in the credit ratings.

The DTE Energy parent ratings take into consideration the pending acquisition of MCN by DTE and the additional leverage to be incurred in the transaction. While the company still is working to close the merger in the first quarter of 2001, delays in receiving final regulatory approvals (and in particular, that of the Federal Trade Commission) may delay the consummation of the transaction into the second quarter. The merger agreement calls for DTE to acquire the common stock of MCN for approximately $2.6 billion, consisting of $ 1.4 billion in cash and the assumption of approximately $1.8 billion of MCN debt.

Prior to the merger with MCN, DTE derives 90% of revenues, 86% of assets and 90% of net income from Detroit Edison. DTE Energy's non-regulated businesses include coal transportation and coal handling, owning and operating coke batteries, gathering land-fill gas, and some venture capital investments in the energy and power industry. Upstream dividends from Detroit Edison provide DTE ample cash flow to cover interest on DTE parent debt.

Upon the merger, DTE Energy will increase its commercial paper program by up to $1.6 billion or borrow under committed bank facilities to fund the cash portion of the acquisition price. Debt leverage of the consolidated group will increase to around 57% of capital, versus 52% before merger. Management plans to reduce debt over the period 2001-2008 using internal cash flows aided by merger-related cost savings and proceeds of securitization at Detroit Edison. Following the merger, DTE Energy is expected to derive roughly 70% of 2002 net income from Detroit Edison, 17% from Michigan Consolidated Gas Company, and 13% from the combined portfolio of non-regulated businesses.

Upon completion of the merger, MCN Energy Group Inc. will become a direct wholly-owned subsidiary of DTE Energy and will be renamed DTE Enterprises. Fitch expects to rate the senior unsecured obligations of DTE Enterprises at `BBB+' and trust preferred and hybrid equity securities of DTE Enterprises at `BBB'. These are the same as the current ratings of these securities of MCN Energy. DTE Enterprises will be an intermediate holding company, with its principal cash flows derived from upstream dividends from its wholly owned subsidiary Michigan Consolidated Gas Co. (MichCon). Fitch expects to affirm the existing ratings of MichCon's outstanding first mortgage bonds and senior secured debt at `A' and commercial paper at `F1'. MichCon will account for 15-20% of consolidated assets and operating income of the new consolidated DTE. MichCon's gas and Detroit Edison's electric distribution businesses are overlapping or contiguous, and management plans to reduce operating expense and enhance operating capabilities through consolidation. Under a three- year tariff plan implemented in January 1999, MichCon's residential gas sales incorporate a fixed-price gas commodity component set at $2.95 per thousand cubic feet. While current spot market and forward prices are substantially higher than this fixed sales price, the company indicates that it has hedged most of the commodity price risk through 2001. MichCon has applied for regulatory authority to terminate this program early in the light of changed market conditions. MichCon's business is relatively low-risk and is expected to produce reasonably stable and predictable annual upstream dividend flows despite significant seasonal variations.

Another subsidiary of DTE Enterprises will be MCN Energy Enterprises Inc. (MCNEE), holding company for the non-regulated business ventures of the MCN Group. MCNEE currently has approximately $570 million of outstanding senior notes and commercial paper with credit support from MCN. DTE Enterprises will continue to provide the same strong credit support agreement to back up MCNEE's obligations, and Fitch expects to affirm MCNEE's senior notes `BBB' and commercial paper and short-term debt `F2'. MCNEE has sold assets and reduced debt over the past 15 months. Remaining businesses at MCNEE include gas marketing, gas storage, midstream gas gathering and processing, and some Michigan oil and gas production assets. Over time, the MCNEE debt may be further reduced with the proceeds of asset sales.