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SEMCO ENERGY Reports Results for the Quarter Ended March 31, 2007

PORT HURON, Mich., May 8 /PRNewswire-FirstCall/ --SEMCO ENERGY, Inc. (NYSE: SEN) today announced its financial results for the quarter ended March 31, 2007. Net income available to common shareholders was $15.1 million (or $0.42 per basic share and $0.37 per diluted share) for the quarter ended March 31, 2007, compared to net income available to common shareholders of $11.2 million (or $0.33 per basic share and $0.28 per diluted share) for the quarter ended March 31, 2006.

The primary factors contributing to the higher earnings for the first quarter of 2007 were an increase in gas distribution margin and a decrease in financing-related costs, offset partially by costs incurred in connection with the pending sale of the Company and an increase in operations and maintenance expense at the Company's Gas Distribution Business. The increase in gas distribution margin, which increased net income for the first quarter of 2007 by approximately $5.2 million when compared to the first quarter of 2006, was primarily due to a rate increase in Michigan and colder weather in Michigan and Alaska. Financing-related costs decreased primarily as a result of lower levels of outstanding debt and Preferred Stock. The decrease in financing- related costs increased net income by approximately $0.6 million, when comparing the first quarter of 2007 to the first quarter of 2006. Costs incurred during the first quarter of 2007 in connection with the pending sale of the Company reduced the Company's net income by approximately $1.8 million. The increase in operations and maintenance expense at the Gas Distribution Business, which decreased net income for the first quarter of 2007 by approximately $0.4 million when compared to the first quarter of 2006, was primarily due to increases in insurance and claims costs and inflationary increases in various expenses, partially offset by a charge incurred in connection with a sublease during the first quarter of 2006 that did not recur in the first quarter of 2007.

George A. Schreiber, Jr., Company President and Chief Executive Officer, said, "We are pleased with the Company's results for the first quarter of 2007. The improvement in earnings, when compared to the first quarter of 2006, was due in large part to a base rate increase in Michigan, which became effective on January 10, 2007. In addition, temperatures in both Michigan and Alaska were colder than they were during the same period of last year, which helped drive the improvement in results."

Schreiber added, "Activity associated with the pending sale of the Company to Cap Rock Holding Corporation continues to move forward. Requests for various regulatory actions have been filed by the parties. We applied for and received early termination of the waiting period under federal antitrust laws, and we await action on our application for approval filed with the Regulatory Commission of Alaska, or RCA. A procedural order has been issued by the RCA scheduling hearings on our application for early-September."

OUTLOOK FOR 2007

The Company currently expects its 2007 net income available to common shareholders to be in the range of $0.29 to $0.33 per share. This earnings outlook range has been increased by $0.02 per share from the previous earnings guidance to reflect the $0.02 per share impact of combined colder than normal temperatures during the first quarter of 2007. This earnings outlook assumes normal weather in the Company's gas distribution markets for the second through fourth quarters of this year and excludes the 2007 year-to-date and future expenses associated with the pending transaction to sell the Company to Cap Rock Holding Corporation. Capital expenditures for property additions are expected to be just under $40 million for 2007.

The Company currently expects its 2007 EBITDA to be approximately $91 million, including $1.9 million of equity earnings from the Company's investment in its gas storage partnership and taking into consideration the same assumptions and exclusion as discussed above for the earnings outlook. EBITDA represents earnings before dividends on Convertible Preferred Stock, interest, taxes, depreciation and amortization and is therefore a non-GAAP financial measure. EBITDA is reported here because the Company believes it is commonly used by investors as an indication of a company's ability to incur and service debt.

While the Company believes EBITDA is a useful measure for investors, it is not a measure presented in accordance with generally accepted accounting principles in the U.S., or GAAP. The Company does not intend EBITDA to represent cash flows from operations as defined by GAAP. You should not consider EBITDA in isolation or as a substitute for net income, cash flows from operations or any other items calculated in accordance with GAAP. This calculation of EBITDA may or may not be consistent with that of other companies. Management views EBITDA as a liquidity measure and, therefore, the nearest GAAP measure is cash flow from operations. A reconciliation of the Company's projected EBITDA to projected cash flow from operations is included in the attached statistics.

SEMCO ENERGY, Inc. distributes natural gas to more than 400,000 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 connection with the proposed transaction with Cap Rock Holding Corporation, a proxy statement of SEMCO ENERGY and other materials have been filed with the Securities and Exchange Commission (SEC). SEMCO ENERGY recommends investors read the proxy statement and other materials, as well as any amendments or supplements to those documents, carefully as they contain important information about SEMCO ENERGY and the proposed transaction. The final proxy statement will be mailed to SEMCO ENERGY's shareholders of record at the close of business on the record date set for a special meeting of the shareholders to be held for the purpose of approving the transaction. Investors will be able to receive free copies of the proxy statement, when available, as well as other filed documents containing information about SEMCO ENERGY at www.sec.gov and from SEMCO ENERGY's website at www.semcoenergy.com.

SEMCO ENERGY and its directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the shareholders of SEMCO ENERGY in connection with the transaction. Information about the directors and executive officers of SEMCO ENERGY and their ownership of SEMCO ENERGY Common Stock is set forth in the Company's Form 10-K/A, dated April 30, 2007, as filed with the SEC. Additional information regarding the interests of participants in the solicitation of Proxies may be obtained by reading the proxy statement for the special meeting.

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 outcome of the pending transaction to sell the Company, the effects of weather, the economic climate, competition, rising commodity prices and resulting increases in working capital requirements, changing conditions in the capital markets, regulatory approval processes and rate recovery mechanisms, gas procurement opportunities, compliance with covenants and success in accomplishing financing objectives, maintaining an effective system of internal controls, success in obtaining new business, success in defending claims against the Company, and other risks detailed from time to time in the Company's SEC filings.



                                SEMCO ENERGY, INC.
                       News Release Statistics (Unaudited)
                     (in thousands, except per share amounts)

                                                       Three months ended
                                                           March 31,
                                                    2007               2006
    Statement of Operations data

      Operating revenues                          $312,131           $271,476

      Cost of gas sold                             242,328            212,604
      Operations and maintenance                    25,538             19,633
      Depreciation and amortization                  7,466              7,149
      Property and other taxes                       3,340              3,056

      Operating income                              33,459             29,034

      Other income and (deductions)
        Interest expense                           (10,028)           (10,549)
        Other                                          910                556
          Total other income and (deductions)       (9,118)            (9,993)

      Income tax (expense) benefit                  (8,637)            (6,903)

      Net income                                    15,704             12,138

      Dividends on convertible
       cumulative preferred stock                      651                948

      Net income available to common
       shareholders                                $15,053            $11,190

      Earnings per share - basic
        Basic                                        $0.42              $0.33
        Diluted                                      $0.37              $0.28

      Average number of common shares
       outstanding
        Basic                                       35,452             33,600
        Diluted                                     42,049             43,006



                                SEMCO ENERGY, INC.
                       News Release Statistics (Unaudited)
    (dollars in thousands, except per share amounts and EBITDA reconciliation)

                                                      Three months ended
                                                           March 31,
                                                   2007               2006

    Business Segment Information

      Operating revenues
        Gas Distribution                          $306,687           $268,764
        Corporate and Other                          7,497              4,643
        Reconciliation to Consolidated
         Financial Statements
          Intercompany eliminations                 (2,053)            (1,931)
          Consolidated operating revenues         $312,131           $271,476

      Operating income (loss)
        Gas Distribution                           $35,195            $28,324
        Corporate and Other                         (1,736)               710
          Consolidated operating income            $33,459            $29,034

      Depreciation and amortization expense
        Gas Distribution                            $7,153             $6,816
        Corporate and Other                            313                333
          Consolidated depreciation and
           amortization expense                     $7,466             $7,149

    Gas Distribution Operating Statistics

        Volumes sold (MMcf)                         31,015             26,631
        Volumes transported  (MMcf)                 11,775             14,523
        Number of customers at end of period       414,619            411,261
        Weather statistics:
          Degree days
            Alaska                                   4,363              4,119
            Michigan                                 3,174              2,942
          Percent colder (warmer) than normal
            Alaska                                   14.7%               5.8%
            Michigan                                (2.9)%            (10.7)%



    Reconciliation of Forecasted EBITDA to Forecasted Cash Flow From
       Operations for the Forecasted Year Ended December 31, 2007

                                                        (dollars in millions)
          Forecasted EBITDA                                               $91
          Forecasted interest expense                                     (39)
          Forecasted income tax expense                                    (8)
          Forecasted changes in assets and
           liabilities and
            other non-cash items                                           21
          Forecasted cash flow from operations                            $65

SOURCE SEMCO ENERGY, Inc.

CONTACT: Analysts, Thomas Connelly, Director of Investor Relations,
+1-248-458-6163, or Media, Timothy Lubbers, Director of Marketing and
Corporate Communications, +1-810-887-4208

"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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