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
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
SOURCE Southeast Michigan Gas Enterprises, Inc.
CONTACT: Robert F. Caldwell, Executive VP and CFO, Southeastern Michigan Gas Enterprises, 810-989-4101