SEMCO ENERGY INC (SEN) SPO
|Company Name||SEMCO ENERGY INC|
|Company Address||1411 THIRD STREET, STE. A
PORT HURON, MI 48060
|CEO||George A. Schreiber, Jr|
|Employees (as of 12/31/2004)||576|
|State of Inc||MI|
|Fiscal Year End||12/31|
|Exchange||New York Stock Exchange|
|Shares Over Alloted||0|
|Shareholder Shares Offered||--|
|Lockup Period (days)||180|
|Quiet Period Expiration||9/5/2005|
Our net proceeds from the sale of the 4,300,000 shares of common stock will be approximately $26.1 million, or approximately $30.0 million if the underwriters exercise their over-allotment option in full, based on a price to the public of $6.32 per share and after deducting the underwriting commission. We will pay the expenses of this offering that are estimated to be $300,000, or $320,000 if the underwriters exercise their over-allotment option in full, from available cash or a borrowing under our short-term bank credit facility. We intend to use the net proceeds from this offering to redeem $26,088,950 in aggregate principal amount of our outstanding 10.25% Subordinated Notes, held by the Trust. We will pay the accrued and unpaid interest on the 10.25% Subordinated Notes with available cash or a borrowing under our short-term bank credit facility. We will send the notice of the redemption promptly following the closing of this offering. The Trust, in turn, will use the proceeds from the redemption to redeem $25,306,275 of 10.25% Cumulative Trust Preferred Securities held by the public and $782,675 of the Trust’s common securities held by us. As of the date of this prospectus supplement, there is $30,927,850 aggregate principal amount outstanding of the 10.25% Subordinated Notes. To the extent the underwriters exercise any of their option to purchase 645,000 additional shares to cover over-allotments, we will use net proceeds therefrom to redeem an equivalent amount of principal of our 10.25% Subordinated Notes.
Competition in the gas sales market generally arises from alternative energy sources, such as electricity, propane and oil. However, this competition is generally inhibited because of the time, inconvenience and investment necessary for residential and commercial customers to convert to an alternate energy source when the price of natural gas fluctuates. For residential and commercial gas sales customers, natural gas typically is the most economical energy source for heating. Competition in the gas transportation market arises from alternate energy sources, such as coal, electricity, oil and steam. Certain large industrial customers may be able to use one or more alternative energy sources or shift production to other facilities if the price of natural gas and delivery services increase significantly. Natural gas has typically been less expensive than these alternative energy sources. However, over the past three years, natural gas prices have been volatile, making some of these alternative energy sources more economical than natural gas. During this period, certain of the Company’s large Michigan industrial customers periodically switched to alternative energy sources. To lessen the possibility of such fuel switching by industrial customers, the Company offers flexible contract terms and additional services, such as gas storage and balancing. Partially offsetting the impact of this price sensitivity among certain large industrial customers has been the use of natural gas as an industrial fuel, because of environmental regulations and other programs and activities and the resultant pressures on industrial customers to reduce emissions from their plants.
We are a public utility company headquartered in southeastern Michigan. Our primary business is a regulated natural gas distribution business with operations in Michigan and Alaska. Founded in 1950, we have historically conducted diversified, non-utility businesses in addition to our natural
gas distribution business. Beginning in 2003, our Board of Directors decided to focus our efforts on our core natural gas distribution business. This shift in strategic focus prompted efforts to market our discontinued construction services business, which was sold in September 2004. Our gas distribution business accounted for approximately 98% of our consolidated revenues in 2004. We purchase, transport, distribute and sell natural gas to approximately 404,000 customers in Michigan and Alaska as of June 30, 2005. Our Michigan gas operations are known as SEMCO Gas and our Alaskan operations are known as ENSTAR. As of December 31, 2004, we had 160 miles and 393 miles of gas transmission pipelines and 5,529 miles and 2,527 miles of gas distribution mains and service lines in and near the SEMCO Gas and ENSTAR service areas, respectively. Our customer base includes residential, commercial and industrial customers, of which approximately 90% were residential as of June 30, 2005. Our largest customers include power plants, food production facilities, paper processing plants, furniture manufacturers, a liquefied natural gas plant, a fertilizer plant and others in a variety of industries. Our executive offices are located at 1411 Third Street, Suite A, Port Huron, Michigan 48060, and our telephone number is (810) 987-2200.
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