In the first major action since George A. Schreiber, former chairman of Credit Suisse First Boston’s Global Energy Group, took over as Semco Energy’s new president and CEO in March, the local gas distribution company announced Thursday that it was suspending its $0.075 per share dividend effective immediately in an effort to strengthen its balance sheet, improve its credit rating and fund future growth.

“Management and the board recognize the importance of the dividend to many of our shareholders,” Schreiber said in a statement. “However, our top financial priority must be to substantially improve the company’s financial health in order to protect shareholders’ current investment and to be better positioned to grow earnings in the future. This decision, while difficult, is consistent with that responsibility.”

Semco shares fell sharply in afternoon trading following the 2:15 p.m. (EDT) announcement and by 3 p.m. were down nearly 3% to $5.92.

Schreiber added that Semco remains strategically focused on the gas distribution business. “Focusing solely on the gas distribution business is where long-term value will be created,” he said. Market growth in Alaska and Michigan, where the company has a total of about 391,000 regulated end-use customers, continues to be above the national average. And Semco’s utility operations rank favorably in operating performance when compared with their peers, Schreiber said, citing American Gas Association statistics.

He said Semco continues to move forward with the proposed sale of its construction business and has made progress improving its financial condition. Although the company’s outstanding debt continues to be rated non-investment grade by the major credit rating agencies, the dividend suspension is “designed to accelerate progress toward improved financial integrity notwithstanding the challenges, including the status of the APC sale, confronting the company,” Semco said in the statement.

In March, Schreiber replaced Marcus Jackson, who resigned in December after the board determined that new leadership was needed because the company had not reached certain financial goals (see Daily GPI, March 11, Dec. 4, 2003). The company posted a net $30 million loss last year (a $1.34 loss per share), down sharply from $8.94 million in net income in 2002. Its return on equity in 2003 was minus 22.81%.

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