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Semco Goes to Alaska for First Distribution System Deal

Semco Goes to Alaska for First Distribution System Deal

Semco Energy Inc. of Port Huron, MI, agreed to buy Enstar Natural Gas and the Alaska Pipeline Co. (together known as Enstar) for $290 million in cash. The Anchorage, AK-based gas distribution system and transmission company are currently owned by Ocean Energy Inc.

The combination of Enstar and Semco creates a gas distribution company with more than 350,000 gas customers and assets of nearly $700 million. The acquisition is consistent with Semco Energy's strategic plan, which includes expanding the company's gas distribution business. It is expected to be accretive to both earnings and cash flow per share beginning in the first full year following completion.

Enstar Natural Gas currently serves more than 100,000 residential, commercial and industrial customers in the Anchorage area. The company has experienced annual customer growth of nearly 3% in the last few years, which is significantly above the industry average. Alaska Pipeline delivers gas from several producing fields in south central Alaska to Enstar's Natural Gas' distribution system.

"The addition of Enstar also will increase the scale and scope of Semco Energy operations, which ultimately will provide opportunities for operational synergies, revenue growth and an increased presence in the public financial markets," said William L. Johnson, Semco CEO. "Semco Energy management has developed an excellent record among its industry peers of being skilled at managing utility properties in non-contiguous service areas in a very efficient manner. ENSTAR fits well with our expertise." Final regulatory approval is expected within six months.

The $290 million pricetag includes the purchase of about $60 million of Enstar debt held by Ocean Energy. At the completion of the transaction Semco will be reorganized so that Enstar and Semco Energy Gas Co. will be divisions of Semco Energy. The combination will be accounted for as a purchase.

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