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SEMCO ENERGY Announces Pricing of Offering Of 325,000 Shares of Convertible Preferred Stock

PORT HURON, Mich., March 9 /PRNewswire-FirstCall/ -- SEMCO ENERGY, Inc. (NYSE: SEN) announced today that it has priced an offering of 325,000 shares of its 5% Series B Convertible Cumulative Preferred Stock, generating gross proceeds to the Company of $65 million, to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933 (the "Act") and to persons in offshore transactions in reliance on Regulation S under the Act. The sale of the preferred stock to the initial purchasers is expected to close on March 15, 2005.

The preferred stock is convertible at the holder's option at any time at an initial conversion rate of 26.1438 shares of SEMCO'S common stock per $200 liquidation preference, which represents an initial conversion price of approximately $7.65 per share of common stock.

SEMCO may redeem the preferred stock for cash after February 20, 2010, at an initial redemption price equal to 100% of the liquidation preference, plus accumulated and unpaid dividends to the date of redemption. The preferred stock is mandatorily redeemable for cash on February 20, 2015, at a redemption price equal to 100% of the liquidation preference, plus accumulated and unpaid dividends to the date of redemption.

SEMCO also has granted the initial purchasers a 30-day option to purchase up to an additional 25,000 shares of preferred stock in connection with the offering.

SEMCO will use the proceeds of this offering to repurchase from an affiliate of k1 Ventures Ltd. all of the outstanding and issued shares (52,542.94) of SEMCO's 6% Series B Convertible Preference Stock and warrants to purchase 905,565 shares of SEMCO's common stock. The aggregate purchase price under the repurchase agreement is $60 million, plus accrued dividends if the closing occurs after March 19, 2005. Additional proceeds, and to the extent that the initial purchasers exercise their option to purchase the additional shares, will be used to repurchase, redeem, repay or retire junior capital and other existing subordinated indebtedness or for general corporate purposes.

This announcement is neither an offer to sell nor a solicitation of an offer to buy any of these securities. These securities have not been registered under the Act or any state securities laws, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Act and applicable state laws. The preferred stock will be eligible for trading under Rule 144A of the Act. Purchasers of the preferred stock are being granted rights to register resales of the preferred stock and underlying common stock under the Act.

SEMCO ENERGY, Inc. distributes natural gas to more than 398,000 customers combined in Michigan, as SEMCO ENERGY GAS COMPANY, and in Alaska, as ENSTAR Natural Gas Company. It also owns and operates businesses involved in propane distribution, intrastate pipelines and natural gas storage in various regions of the United States.

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, success in defending claims against the Company, and other risks detailed from time to time in the Company's Securities and Exchange Commission filings.

SOURCE  SEMCO ENERGY, Inc.
    -0-                             03/09/2005
    /CONTACT:  Analysts, Thomas Connelly, Director of Treasury & Investor
Relations, +1-248-458-6163, or Media, Timothy Lubbers, Director of Marketing &
Corporate Communications, +1-810-877-4208, both of SEMCO ENERGY, Inc. /
    /Web site:  http://www.semcoenergy.com /
    (SEN)

CO:  SEMCO ENERGY, Inc.
ST:  Michigan
IN:  OIL UTI
SU:  OFR

KZ
-- NYW217 --
9269 03/09/2005 21:21 EST http://www.prnewswire.com
"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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