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Semco Sells Gas Marketing Unit to MCN

Semco Sells Gas Marketing Unit to MCN

Semco Energy Inc. sold Semco Energy Services, its natural gas marketing arm, to MCN Energy Group only weeks after announcing intentions to exit the gas marketing side of its business. No financial terms of the deal were disclosed except that Semco expects to record a gain on the sale and the companies expect the transaction to close by the end of March.

William Johnson, Semco Energy's CEO, said the move was made so Semco can focus on becoming one of the largest providers of underground engineering and construction services in North America. Semco's businesses in both industries increased their revenues in 1998. Engineering Services jumped from $5.6 million in 1997 to $41.4 million in 1998. Construction Services nearly doubled its revenue from $13.2 million in 1997 to $25.9 million in 1998.

In 1998, Semco's gas marketing outfit reported $398 million in revenues compared to $555 million in 1997. Although it sold 166 Bcf (455 MMcf/d) of gas, 1998 retail sales totaled 13 Bcf to 140 industrial and commercial customers and 4,000 retail accounts throughout Michigan. The rest of the volume was sold to wholesale customers.

Johnson first announced plans to sell Semco Energy Services when the company posted its 1998 results in early February. He said then that "energy marketing is a very competitive business with high risks and low returns. It does not fit well with our future business strategies."

MCN Energy's subsidiary, CoEnergy Trading Co., will acquire the 13 Bcf of contracts. An MCN spokesman said the company was not interested in Semco Energy Services' wholesale business. In 1998, CoEnergy marketed 500 Bcf of gas to customers in the Great Lakes, Mid-Atlantic, New England and eastern Canada. "This acquisition fits very well with our existing marketing, transportation and storage assets," said CoEnergy CEO, Glen Kinder.

MCN Energy spokesman Stewart Lawrence said, "This is a great addition in terms of location... But we have no interest in wholesale. All we are doing is picking up 13 Bcf of gas contacts... It's a nice addition, but we sold 500 Bcf to customers last year."

John Norris

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