FARMINGTON HILLS, Mich., June 19 /PRNewswire-FirstCall/ --
SEMCO ENERGY, Inc. (NYSE: SEN) announced that the Board of Directors has
changed the dividend rate on the Common Stock of the Company and today
declared quarterly dividend No. 104 of $.075 per share on the common stock of
the Company. The dividend is payable on the 15th day of August 2003 to
shareholders of record at the close of business on August 1, 2003. The annual
dividend rate is now $.30 per share. Previously, the annual dividend rate was
$.50 per share.
Marcus Jackson, President and Chief Executive Officer of SEMCO ENERGY,
Inc., said "Reducing the dividend is prudent given the level of earnings and
should result in a long-term payout ratio more consistent with our peers.
This action will provide additional cash to fund the growth of our gas
distribution business, which is growing above the industry average. Retaining
additional equity demonstrates the Company's commitment to strengthen the
equity component of its capital structure."
"The Company's gas distribution business continues to perform as expected.
However, in 2003 expected financing costs will be higher and expected earnings
for Construction Services will be lower. Based on normal weather in Michigan
and Alaska from now through year-end, and excluding one-time debt
extinguishment costs, earnings per share are currently expected to be between
$.30 and $.35 for 2003," said Jackson. The Company's previous guidance was
$0.55 to $0.60 per share. One-time costs of approximately $.69 per share were
incurred as part of the Company's recently completed refinancing and consist
of make-whole and other premiums paid in connection with the repurchase of
outstanding debt. Including the one-time charges, the Company expects a loss
of $.35 to $.40 per share for 2003.
Financing costs are expected to be higher due to approximately $70 million
additional long-term debt outstanding as a result of the Company's recent
refinancing. Of the additional debt, approximately $35 million was used to
refinance lower-cost, short-term debt, thereby increasing borrowing capacity
under the Company's short-term credit facility. This additional short-term
capacity is necessary to purchase natural gas at considerably higher prices
than in previous years. The higher financing costs, included in the above
estimates, are expected to reduce net income by $.11 per share in 2003.
Results for Construction Services are expected to improve in 2003 compared
to those reported for 2002, however, the results will be less than previously
anticipated. Cash flow generated by this business segment is expected to be
positive in 2003. In certain regions, Construction Services has bid on
numerous projects that were released for bid in the spring of this year. In
the last four to six weeks, the Company has not experienced the expected level
of success in being awarded these projects. As a result, Construction
Services has lowered its forecast for projects to be awarded throughout the
remainder of the year. The pipeline construction industry is currently
characterized by intense competition fostered by the recent influx of
companies that in prior years focused on telecommunications construction. In
addition, capital expenditure programs at certain of our utility customers are
now forecast at lower levels than previously anticipated.
Regarding Construction Services, Jackson said, "On the upside, several
factors provide strong long-term fundamentals. Spending on gas transmission
and distribution infrastructure is expected to grow in the future, and scale
of operations, which we have, is expected to be a critical factor in the long-
term. Nationally, the natural gas infrastructure currently in place is not
sufficient to meet future growth projections, therefore, considerable
expenditures are being forecast for future years."
"SEMCO's financing is in place, the Gas Distribution business is
performing very well and we're committed to improving the profitability of
Construction Services while the market overcomes some near-term challenges and
regenerates itself. We will continue our efforts to implement cost
efficiencies and pursue new business opportunities in the Construction
Services business," said Jackson.
SEMCO ENERGY, Inc. is a diversified energy and infrastructure company that
distributes natural gas to more than 385,000 customers in Michigan and Alaska.
It also owns and operates businesses involved in natural gas pipeline
construction services, propane distribution and 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. Statements that are not
historic facts, including statements about the Company's outlook, beliefs,
plans, goals and expectations, are forward-looking statements. Factors that
may impact forward-looking statements include, but are not limited to, the
effects of weather, the economic climate, competition, commodity prices,
changing conditions in the capital markets, regulatory approval processes,
success in obtaining new business and other risks detailed from time to time
in the Company's Securities and Exchange Commission filings.
SOURCE SEMCO ENERGY, Inc.