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

The combination of Enstar and Semco creates a gas distributioncompany with more than 350,000 gas customers and assets of nearly$700 million. The acquisition is consistent with Semco Energy’sstrategic plan, which includes expanding the company’s gasdistribution business. It is expected to be accretive to bothearnings and cash flow per share beginning in the first full yearfollowing completion.

Enstar Natural Gas currently serves more than 100,000residential, commercial and industrial customers in the Anchoragearea. The company has experienced annual customer growth of nearly3% in the last few years, which is significantly above the industryaverage. Alaska Pipeline delivers gas from several producingfields in south central Alaska to Enstar’s Natural Gas’distribution system.

Semco spokesman Barrett Hatches said there are no plans toexpand the distribution system or the pipeline except as necessaryfor growth. “We really haven’t completed our plans.” Semco was oneof several companies that expressed an interest in Enstar.Discussions began in early June.

“The addition of Enstar also will increase the scale and scopeof Semco Energy operations, which ultimately will provideopportunities for operational synergies, revenue growth and anincreased presence in the public financial markets,” said WilliamL. Johnson, Semco CEO. “Semco Energy management has developed anexcellent record among its industry peers of being skilled atmanaging utility properties in non-contiguous service areas in avery efficient manner. ENSTAR fits well with our expertise.” Finalregulatory approval is expected within six months.

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

Semco Energy is a diversified energy services and infrastructurecompany currently organized into two major segments: natural gasdistribution and unregulated diversified businesses. Thedistribution segment currently serves more than 250,000 customersin Michigan’s Upper and Lower peninsulas.

The diversified businesses are operated under Semco EnergyVentures and consist of energy engineering and quality assuranceservices, underground construction services, propane operations andintrastate pipeline businesses in nine states.

Joe Fisher, Houston

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