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SEMCO ENERGY GAS COMPANY, TransCanada PipeLines Limited Sign Three-Year Asset Management Agreement

PORT HURON, Mich., Oct. 8 /PRNewswire/ -- SEMCO ENERGY GAS COMPANY today announced the signing of a three-year agreement with TransCanada PipeLines Limited (NYSE: TRP) for management of the company's natural gas supply.

The company also will buy the majority of its natural gas supplies from TransCanada for the three years of the agreement, which is effective April 1, 1999. Alliances of this type are known in the industry as "asset management" agreements.

"This agreement will have positive results for SEMCO ENERGY customers and shareholders with lower prices for our product and the opportunity to increase earnings in the future by being on the competitive edge," said William L. Johnson, Chairman, President and Chief Executive Officer of SEMCO ENERGY, Inc. (Nasdaq: SMGS).

A strategic alliance with an asset manager is another move by SEMCO ENERGY GAS COMPANY to position itself for the competitive market that will exist after natural gas industry deregulation is completed, said Jon A. Kosht, Vice President for Rates and Regulatory Affairs.

The company in September announced it will reduce and freeze its gas cost recovery factor for three years beginning with the April 1999 billing cycle. The GCR factor is the purchased gas cost component of the rates charged by the company to its customers.

"This asset management agreement is an opportunity to further optimize our assets by aligning ourselves with a major player in the natural gas industry," Kosht said.

TransCanada, based in Calgary, Alberta, is a leading North American energy services company with businesses in transmission, marketing and processing. TransCanada Energy markets most forms of energy, including natural gas and natural gas liquids, crude oil and petroleum products as well as electricity. Steve Becker, Executive Vice President of TransCanada Gas Services, said the company's offices in Calgary, Houston and Omaha will be involved in managing the assets of SEMCO ENERGY GAS COMPANY.

"We're confident TransCanada's asset management expertise will result in significant efficiencies to help SEMCO keep their products and services competitive," he said.

The agreement calls for TransCanada to manage 157.5 million cubic feet (MMcf) of gas transportation daily on five US pipelines on behalf of SEMCO ENERGY GAS COMPANY. TransCanada also will manage 16 billion cubic feet of gas storage for the utility.

SEMCO ENERGY GAS COMPANY, a regulated natural gas distributor, has more than 240,000 customers in the Upper and Lower Peninsulas of Michigan.

SEMCO ENERGY, Inc. has two other subsidiaries: SEMCO ENERGY SERVICES, an unregulated division which markets natural gas throughout the United States and Canada; and SEMCO ENERGY VENTURES, which acquires and operates companies involved in natural gas pipeline and distribution system construction, pipeline construction engineering and propane operations.
CONTACT: Francis Lieder of SEMCO, 810-987-2200, ext. 4186, or fax, 810-987-4098

"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.

©2006 SEMCO ENERGY, Inc., All Rights Reserved.