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SEMCO ENERGY Projects it Will Save Between $5 to $6 Million per Year

PORT HURON, Mich., July 10 /PRNewswire/ -- SEMCO ENERGY, Inc. (Nasdaq: SMGS) today announced projected annual pre-tax savings of between $5-$6 million as a result of employee-related programs being implemented during 1998. The programs include the introduction of a new flexible benefit plan for employees, modifications to the pension plan and an early retirement plan. A portion of these savings will be realized in 1998 and the actual impact on Company earnings going forward will depend on a number of factors including income taxes, the Company's incentive clause, future benefit plan performance and operating initiatives.

These programs are in keeping with the Company's strategic objectives of maintaining a competitive work force, improving profitability, increasing financial strength and enhancing shareholder value, said Chief Financial Officer Robert J. Digan, II. "The successful implementation of the programs are expected to align employee levels and the benefit package with those of other progressive companies. They also result in significant savings to the Company. These changes, along with selling our unprofitable assets (i.e. NOARK pipeline) and the building of our non-utility businesses, are strategic steps the Company is taking to continue its leadership position in the competitive 21st Century marketplace."

The new flexible benefit plan goes into effect during the third quarter of 1998. The cafeteria-style program gives employees a set amount of "benefit dollars." Employees may select benefits from a number of options and levels of coverage which best meet their individual needs. If the cost of the benefits exceeds the amount of "benefit dollars," the difference is paid by the employee. Formerly, all employees were provided one set of benefits. This approach was costly to the Company and less efficient in providing benefits to employees than the new plan. The company anticipates savings of approximately $100,000-$300,000 per year under the new plan.

Previously this year, the Company modified the employee pension plan to make it more comparable with other utilities and major employers in the region. These modifications are anticipated to result in a cost savings to the Company of approximately $2 million per year.

The Company expects to save another $3.5 million per year as a result of 101 employees accepting an early retirement plan offered in the first quarter of 1998.

"The cumulative impact of these actions is anticipated to save between $5 and $6 million on an annualized pre-tax basis. These initiatives are important steps for SEMCO ENERGY to be a successful company in the future," said Digan.

SEMCO ENERGY is an energy-focused holding company. It has three subsidiaries: 1) SEMCO ENERGY GAS COMPANY distributes regulated natural gas to 240,000 customers in Michigan's Upper and Lower Peninsula; 2) SEMCO ENERGY SERVICES markets gas and related services and 3) SEMCO ENERGY VENTURES operates and acquires companies involved in natural gas construction, energy engineering and propane operations.

THE "SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This press release contains forward-looking statements that involve risks and uncertainties, including but not limited to, operating expenses, operating income, returns on invested assets, regulatory approval processes and other risks detailed from time to time in the Company's Securities and Exchange Commission filings.
Company News On-Call: http: // or fax, 800-758-5804, ext. 769113
CONTACT: Edric R. Mason, Jr. of SEMCO ENERGY, 810-989-4104, or fax, 810-989-4098

"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: Statements in this press release regarding SEMCO Energy's business which are not historical facts are "forward-looking statements" that involve risks and uncertainties. For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's Annual Report or Form 10-K for the most recently ended fiscal year.

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