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SEMCO ENERGY Reports on Strategic Review & Earnings Outlook

PORT HURON, Mich., Jan. 2 /PRNewswire/ -- SEMCO ENERGY, Inc. (NYSE: SEN) today announced that it has completed its strategic review process initiated last July. According to William L. Johnson, Chairman, President and Chief Executive Officer, "During the last few months we have evaluated various strategic combinations and potential transactions. As others in the utility industry have recently found, the market for utility assets is currently inadequate to create added value for our shareholders. Our situation was further complicated by regulatory uncertainty at ENSTAR Natural Gas Company, a utility division of SEMCO ENERGY in Alaska."

In July of last year, with the assistance of its financial advisor, Banc of America Securities, LLC, SEMCO ENERGY began reviewing its strategic alternatives, including possible merger or sale, with the objective of completing that review by year end. In late November, the Regulatory Commission of Alaska (RCA) issued an order requiring ENSTAR to file information in addition to earlier data submitted as part of the change of control approval to determine if rates are just and reasonable. This development created uncertainty for prospective partners or buyers.

"We anticipated further regulatory review some time in the future when we acquired ENSTAR, although not in this timeframe," Johnson said. "The Regulatory Commission of Alaska is simply doing its job. As I have said before, supplying this additional information presents an opportunity to work with the Commission to demonstrate that our rates, which are among the lowest in the country, are just and reasonable."

Johnson reaffirmed the Company's intent to resume executing its strategic plan, increase earnings and improve profitability. He added, "Currently, we find that the best path to maximizing shareholder value is to implement our strategic plan. As always, should other opportunities or offers which maximize shareholder value be presented in the coming months, we will evaluate them fully."

Amplifying on the Company's Strategic Plan, Johnson said, "Although as noted later, results for 2000 likely will be less than desirable due to the impact of warmer weather and other business events, all our businesses are well positioned for considerably better results in 2001, with a little help from the weather. In addition to focusing on internal revenue growth, part of our strategy is to continue making selective acquisitions of a size consistent with our ability to raise capital efficiently. These acquisitions, in energy engineering and construction, as well as information technology, will help grow our existing lines of business," Johnson said. "We look forward to a brighter future for SEMCO ENERGY as we continue executing our business strategies."

With regard to 2000 earnings, the Company anticipates reporting earnings per share for the year at approximately 10% below current analysts' estimates. Major factors for lower earnings expectations are the impact of warmer-than- normal weather during the fourth quarter at the Company's gas distribution businesses in Michigan and Alaska. This impact has been reduced somewhat by a colder-than-normal December in Michigan. In addition, construction services revenues have been negatively impacted by inclement weather in November and December in the Midwest that has delayed completion of scheduled projects and by a slowdown in cable and fiber optic installations.

The Company has scheduled an earnings report for the fourth quarter and full year 2000 on January 31, 2001.

SEMCO ENERGY, Inc. is a diversified energy and infrastructure company that distributes natural gas to more than 350,000 customers combined in Michigan and Alaska. It owns and operates businesses involved in gas engineering and quality assurance services, pipeline construction services, propane distribution, intrastate pipelines and natural gas storage in various regions of the United States. In addition, it provides information technology and outsourcing services, specializing in the mid-range computer market.

The following is a "safe-harbor" statement under the Private Securities Litigation Reform Act of 1995. This release contains forward-looking statements that involve risks and uncertainties including, but not limited to, statements involving the Company's expectations regarding operating revenues and expenses, operating income, returns on invested assets, regulatory approval processes, success in obtaining new business, success in integrating acquired businesses, and other risks detailed from time to time in the Company's Securities and Exchange Commission filings.
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CONTACT: Analysts: Sebastian Coppola, 810-989-4101, fax: 810-989-4099, or Media: Francis R. Lieder, Jr., 810-987-2200, ext. 4186, fax: 810-989-4098, both of SEMCO ENERGY, Inc.

"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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