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Southeastern Michigan Gas Enterprises, Inc. Writes Down Investment in NOARK Pipeline System

PORT HURON, Mich., Jan. 16 /PRNewswire/ -- William L. Johnson, President and Chief Executive Officer of Southeastern Michigan Gas Enterprises, Inc. (Nasdaq: SMGS) today announced a one-time non-cash after-tax charge against earnings of $21 million of its investment and participation as a general partner in NOARK Pipeline System, L.P. (NOARK). On a pre-tax basis, the charge against earnings, to be taken in fourth quarter 1996, represents a significant portion of the Company's current investment, including loan guarantees, in the 302-mile gas pipeline.

"Relieving the Company of the drag on its earnings and stock price caused by the NOARK operation has been one of my primary goals since I joined the Company in May of last year," William L. Johnson, President and Chief Executive Officer, said. "The resolution of this issue will not affect the Company's cash or stock dividend." Johnson also stated that the decision to take the one-time non-cash charge will positively impact earnings per share by $.14.

The decision to write-down the Company's investment in the NOARK partnership was reached after an extensive review by a team of outside investment bankers, accounting firms, other natural gas and pipeline consultants and legal counsel to arrive at the best decision that would enhance shareholder value over the long-term. "The investment community has been very concerned about our investment since the pipeline began operating at a loss in 1992," Johnson explained. "We believe our stock price is undervalued, due to the negative impact of NOARK."

The Company will continue to explore opportunities to improve the project, but the write-down will eliminate the need for significant NOARK operating losses being recorded in future income statements. The Company will continue to try to sell its interest in NOARK to a company better positioned to take advantage of opportunities which the pipeline could present to a company with the right natural gas supply and markets.

NOARK is an intrastate natural gas pipeline of approximately 302-miles, extending from Ft. Chaffee, Arkansas across the northern part of the State. The pipeline was built during 1991-92 at a cost of $103 million. The NOARK partnership includes Southwestern Energy Company as operator and a general partner, with an ownership interest of 48 percent, and The Prudential Insurance Company, the primary lender to the partnership, with a 20 percent limited partnership interest in addition to the Company's 32 percent general partnership interest.
SOURCE Southeast Michigan Gas Enterprises, Inc.
CONTACT: Robert F. Caldwell, Executive VP and CFO, Southeastern Michigan Gas Enterprises, 810-989-4101

"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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