2010 ANCSA regional corporation overview
Major engines for the state; revenues of 12 ANCs top $7.5 billion
September 2, 2011
Almost 40 years ago, Congress undertook a "great experiment" when it passed the Alaska Native Claims Settlement Act, creating for-profit corporations instead of reservations when resolving aboriginal land claims. Under ANCSA, Alaska's Natives received title to 44 million acres of land and $962.5 million, which was divided between 12 regional and more than 200 village corporations. A 13th corporation was later created for Alaska Natives living outside the state.
The corporations were tasked with dual financial and social mandates. They were to create wealth for their shareholders and descendants, provide jobs and protect their social and cultural traditions.
By most measures, the corporations have succeeded. Despite a rocky start and some missteps by some in the past four decades, the 12 Alaska-based corporations are profitable and are major economic engines for state. They have taken the traditional Alaska business model, in which resources and money flowed out of the state, and reversed it. They have operations around the globe, as well as in Alaska, in such diverse fields as government services, construction, real estate, mining, tourism, technology and energy. They have created thousands of jobs in Alaska and contribute millions of dollars to scholarships, job training and cultural programs.
In the past decade, the corporations have found tremendous success in government service contracts, which contribute as much as 94 percent of total revenues for some corporations. In 2010, total revenues for the 12 Alaska-based regional corporations exceeded $7.76 billion, fueled in a large part by government contracts.
Many of these were granted under the Small Business Administration's business development's 8(a) program, which grants specific preferences to Alaska Native-owned businesses. The corporations say they are gaining valuable experience and expertise under the program but the preferences have come under attack in Congress. New rules adopted by the SBA early in 2011 strengthened oversight and reporting of government services contracts, but efforts by Congress to roll back preferences granted to Alaska Natives continue.
Corporations say they are working to diversify their holdings, but government contracts will likely continue to be an important component of their businesses whether under 8(a) or in the competitive field.
The corporations also are working together to find solutions to high energy prices in rural Alaska. NorthStar Gas, a partnership between Calista and NANA Regional corporations and 16 village corporations, is working with bulk fuel distributor Delta Western to create a stable source of fuel in Western Alaska. NorthStar Gas acquired the Cauneq, a 162-foot-long fuel and cargo barge to improve deliveries to remote villages.
All of the corporations felt the sting of slumping natural resource markets as 7(i) distributions from Arctic Slope Regional Corp.'s Alpine Oilfield and NANA Regional Corp.'s Red Dog mine revenues decreased nearly 70 percent over 2009. Prices have since recovered.
The effects of climate change are being felt strongly in the Arctic, not only because of warmer temperatures and thinning ice conditions, but also in the regulatory climate. Four regional corporations as well as village corporations and North Slope Native organizations formed a coalition to sue the federal government over its designation of 187,000 square miles of Arctic coast as polar bear critical habitat designation.
Arctic Slope Regional Corp.
Arctic Slope Regional Corp., Alaska's largest private enterprise, recorded its highest-ever revenue in 2010, $2.33 billion, up from $1.95 billion in 2009. It employs 10,000 people, 3,000 in Alaska. It has five major business segments: petroleum refining and marketing, energy support services, construction, government services and resource development.
The Barrow-based corporation, with about 11,000 Inupiat stockholders, rode a strong year in the energy sector in 2010. Arctic Slope was one of the first corporations to enroll shareholders born after 1971. Currently, nearly 70 percent of shareholders were born after 1971.
In fall 2010, Arctic Slope paid a record dividend of $51.83 per share. Most shareholders own 100 shares. It has paid $484 million in dividends over its 40-year history.
It holds title to 5 million acres of highly mineralized land on the North Slope, including Alpine Oil Field and the Western Arctic Coalfields.
In 2010, it distributed $20 million in scholarships, community support funding and training and development programs.
Ahtna Corp. has built a strong base in government services and feared a weak economy and a congressional move to strip Alaska Native preferences from the Small Business Administration's 8(a) program would negatively affect them.
Despite those concerns, the Glennallen-based corporation recorded its sixth consecutive year of profitability.
In 2010, about 70 percent of Ahtna's $243 million in revenues came from government services, said President and CEO Ken Johns. Ahtna has 10 operating subsidiaries in areas such as construction, facilities management, environmental remediation, oil and gas pipeline maintenance, janitorial services and surveying. It created five new subsidiaries in 2010 to provide services in information technology, facility support, environmental cleanup and other areas.
The SBA 8(a) program has been a key part of its recent profitability; however Ahtna is looking at diversification strategies.
"We've been moving out of 8(a)" Johns said. "The system is working. We've been gaining experience from it and are working being able to survive outside 8(a)."
Ahtna is working with Raven Gold Alaska and Ocean Park Ventures Corp. to explore for gold at the Chisna project and is looking natural gas development in its region to provide more jobs for its 1,600 shareholders and their descendants and help the company diversify. Ahtna is one of five Alaska Native corporations to have opened enrollment to descendants of the original shareholders. Ahtna is creating a permanent fund to help generate dividends for future needs.
Net revenues were $1.7 million and the board declared a dividend of $4 per share, an increase of $1.21 over 2009.
In 2011, Ahtna is focusing on reorganizing and stabilizing its organization. It is consolidating corporate and accounting operations to improve cash flow. Johns announced plans to retire in 2012. A successor has not been named.
A change of leadership highlighted 2010 for The Aleut Corp., with Dave Gillespie named as CEO and Thomas Mack retaining the title of president.
Government contracting under the umbrella of Aleut Management Services accounts for about 80 percent of revenues for The Aleut Corp. Revenues were up in 2010, at $159.4 million, an increase of $12.5 million over 2009. Net income was $20.29 million, almost half of the $43.3 million seen in 2009.
In the past couple of years, AMS growth has slowed in part because of government insourcing and stronger competition for government contracts, according to Gillespie.
AMS is being restructured to be more cost-effective with Sam Cole taking over as CEO of the subsidiary. It provides services in information technology, communications, base operations support, logistics and civil engineering. It is increasingly moving into the competitive arena for government contracts.
The Aleut Corp. recently announced its largest dividend ever, $21 per share. Most of its 3,600 shareholders hold 100 shares apiece. It also provided scholarships for 140 shareholders.
With its strategic location in the North Pacific, The Aleut Corp. is well-positioned to take advantage of the opportunities presented by new polar shipping routes opened by melting sea ice. It owns many of the facilities at the defunct Adak Naval Base, as well as a hotel. A subsidiary provides support for the Missile Defense System's floating radar warning station, which is based in Adak and Hawaii.
Bering Straits Native Corp.
2010 was a good year for the Nome-based regional corporation, which recorded $190 million in revenue, up from $160 million.
The bulk of the revenue - 94 percent - came from the corporation's government-contracting subsidiaries.
"We're still heavily vested in the 8(a) program," said BSNC chief financial officer Wally Powers. "We recognize the concerns about 8(a), but even if 8(a) goes away, we're heavily invested in government contracting. We've built the infrastructure and will continue that route.
"It's going to be more competitive," Powers continued. "We're going to have to do more marketing and do what it takes to succeed."
One of Bering Straits' projects outside the 8(a) realm was its partnership with Neeser Inc. to build a new $90 million hospital in Nome. It also touts its Banner Wind partnership with village corporation Sitnasuak Native Corp. to build and operate an 18-tower wind farm, which helps supply electricity to Nome's grid.
One disappointment was NovaGold Resource's pullback from the Rock Creek gold mine just outside Nome, said Matt Ganley, vice president of resources and external affairs. The mine would have provided about 160 well-paying jobs in the area.
The mine's status is unclear, he said. Startup problems and cost overruns plagued the mine when it opened and NovaGold decided to sell it and focus on other properties. BSNC is hoping Nova Gold won't button it up to the extent that it would be difficult to open in the future, Ganley said.
While the gold prospects are uncertain at the moment, despite record-high prices, Bering Straits is also prospecting for rare earth minerals, which are used in technology products. Ganley said indications show such minerals are widespread in the region and could complement development of precious metals such as gold and silver.
Bristol Bay Native Corp.
Bristol Bay Native Corp. has long been a quiet giant among Alaska businesses, reaping steady success for years. 2010 was no different as the corporation, with its roots in the Bristol Bay area of Southwest Alaska, brought in $1.4 billion in revenues in fiscal year 2010.
It marked the second most-profitable year for Bristol Bay, and its 32nd consecutive year of profitability.
"It's been a growth process for us, but we're still staying true to our roots and foundation in ANCSA," said President and CEO Jason Metrokin.
Bristol Bay's business focuses on its investment portfolio, petroleum distribution operations, contract services and natural resources. After incurring big losses in fiscal year 2009, its portfolio showed a return of 38 percent over 2009, ending the fiscal year in March 2010 with a value of $85 million. Its PetroCard subsidiary, which is Bristol Bay's largest single source of revenue, saw declines in 2010 as prices rose and consumers cut back.
Its contract services sector brought in $102.7 million in revenues. A project by subsidiary CCI to build a seawall in Iraq suffered a $25 million loss, leading to an overall drop in services income and operating cash flow. The corporation is applying for remediation from the Army Corps of Engineers. Bristol Bay is planning to expand its Texas construction businesses and increase its non-8(a) contracts.
Other sectors also saw drops, but all showed positive earnings. Bristol Bay had$31.9 million net revenue in 2010, compared to $5.17 million in 2009.
The corporation also officially announced its opposition to the giant Pebble Mine gold, copper and molybdenum mine prospect in its region. Although the mine could have a huge economic impact on the region, shareholders fear its effect on the world-renown salmon fisheries in Bristol Bay that now power the region's economy.
The corporation, with 8,600 shareholders, has been paying regular dividends since 1978. Quarterly payouts in 2011 were $3.25 per share.
Bristol Bay also provides funding for Marrulut Eniit, a 10-unit assisted living facility in Dillingham. A smaller facility is in Naknek. Marrulut Eniit, Yupik for Grandma's House, is the first state-licensed assisted living facility in rural Alaska.
Bristol Bay's fiscal year for 2011 ended in March. It is reporting revenues of $1.6 billion for that period.
Calista saw a major change at the top in 2010, with longtime CEO Matthew Nicolai stepping down from the corporation, which has 15 subsidiaries in such fields as telecommunications, marketing, construction and facility management. Andrew Guy was named to replace him.
Bethel-based Calista Corp., is focusing on expanding its revenue base beyond government contracting, which provided 69 percent of its 2010 revenue. The corporation has 13,000 shareholders and a 6.5 million acre land base in southwest Alaska.
In 2010, Calista's revenues increased 16 percent to $235 million with a net income of $18.3 million.
Work continues on the Donlin Creek gold prospect, with feasibility studies wrapping up and a decision on whether to begin the permitting process. The mine, near the village of Crooked Creek, is being developed by a joint venture of NovaGold Resources and Barrick Gold and could have the same economic impact on Southwest Alaska that Red Dog zinc mine has on Northwest Alaska. It could produce up to 1 million ounces of gold annually and employ hundred of workers.
In 2010, Calista acquired two long-standing Alaska businesses, Brice Inc. and Yukon Equipment, Inc. Brice has been in operation for 40 years, doing civil and Arctic construction, commercial gravel and international marine operations. Yukon Equipment was started almost 70 years ago, and provides heavy equipment sales, service, parts and rental. About 30 percent of employees at Calista subsidiaries are Alaska Natives.
Calista formed a new subsidiary, Calista Real Estate, to acquire real estate in the western United States that is in distress or foreclosure.
It distributed $78,000 in scholarships and declared a $2.75 per share dividend.
In July, it announced it was shutting down and liquidating Alaska Newspapers Inc., which ran a chain of five rural weekly newspapers, as well as its quarterly magazine, First Alaskans.
Chugach Alaska Corp.
The weak economy and battle over the SBA 8(a) program caught up with Chugach Alaska Corp. in 2010. Revenues totaled $937 million, down from the $1.1 billion it recorded in 2009, as changes in federal procurement policies and the loss of big contracts to competitors affected the bottom line, according to the corporation's annual report. The corporation received funds from the settlement of the Exxon Valdez oil spill in 2008 and 2009, but none in 2010.
It is the third-highest revenue in corporation's history. Despite a reduction in revenue, gross margins increased to 12.6 percent over 11.35 percent in 2009. Net income was $26.5 million.
The corporation, headquartered in Anchorage with a land base in Prince William Sound, has 2,300 shareholders. Its primary business operations are government and other contract services including base operations support, environmental management, construction management, information technology, education and training, engineering and metal fabrication.
Base operations support services are the core of Chugach Alaska's business, providing 64 percent of total revenue and 71 percent of total gross margin. In its construction services company, the completion of a major short-term project in 2009, valued at $109 million accounted for a large part of the revenue reduction in that sector.
Chugach Alaska is continuing to diversify its holdings and improve its competitive strategies and reduce administrative costs.
The corporation also supports a number of internship, training and scholarship programs, as well as its Nuuciq Spirit Camp and cultural programs at its Nuchek Island facility. It contributed $3.4 million toward those programs in 2010.
Dividends of $41.92 per share were announced in 2010, for a total $8 million payout. In the past 10 years, Chugach Alaska has paid more than $80 million in dividends.
CEO Ed Herndon stepped down in July of 2011. Chairman of the Board Sheri Buretta was named acting CEO.
Cook Inlet Region Inc.
Cook Inlet Region Inc. has had many ups and downs in the past decade and 2010 was another challenging year. The Anchorage-based corporation recorded $16.5 million in revenue, down from $24.5 million in 2009.
CIRI is home to diverse businesses, including energy and resource development, oilfield and construction services, real estate, tourism and telecommunications. The corporation is retooling its business strategies, however, to focus less on short-term profits and more toward steady, long-term sustainable growth, President and CEO Margaret Brown said in a statement to shareholders. Investments toward that goal may reduce net income in the next few years.
Its heavy construction and oilfield services subsidiaries performed well in 2010. Successful projects include the construction of a new bridge over the Tanana River east of Tok and several large road projects. Peak Oilfield Service Co. won contracts to support ExxonMobil's North Slope operations.
CIRI is expanding its energy and clean technology businesses, highlighted by its underground coal-gasification project on the west side of Cook Inlet and its wind power generation project on Fire Island, near Anchorage.
CIRI has extensive real estate and property management interests in Alaska and several western states. Taking advantage of the soft real estate markets in the western United States, CIRI invested in four large multi-family housing developments in Tucson and Phoenix. It is also developing three mixed-use office and retail sites in Anchorage.
CIRI continues to aggressively market its tourism division, which resulted in increases in day passenger counts for its tours in Kenai Fjords and Prince William Sound, despite a weak overall tourism market.
Its North Wind environmental remediation subsidiary, which was acquired at the end of 2009, had a strong year. It worked on more than 500 projects across the country.
CIRI has paid dividends every year since 1980, including a total of $22.2 million in 2010. With its 2011 payments, cumulative dividends will surpass $963 million, the total value of the original ANCSA cash settlement. It has more than 8,100 culturally diverse shareholders.
Fairbanks-based Doyon Ltd., increased its revenues to $280.2 million in 2010, with a net income of $15.7 million. Its business operations are divided into four "pillars": oilfield services, government contracting, natural resource development and transitional.
Although oilfield services have traditionally provided the bulk of Doyon's operating income, in 2010 government services provided two-thirds of the total, or $21 million. Oilfield services income saw a steep drop, from $27.6 million in 2009 to $11.7 million in 2010.
Doyon is the largest landowner in Alaska, with 12.5 million acres and 18,000 shareholders. It is focusing on its mineral, oil and gas resources, most recently working with village and tribal groups in Stevens Village and Birch Creek to do seismic exploration of likely petroleum deposits in the area, which is adjacent to the trans-Alaska oil pipeline. Early indications showed an active hydrocarbon system and more seismic studies are planned.
Doyon is 60 percent equity owner of a joint venture to explore for oil and gas in the Nenana Basin, 60 miles west of Fairbanks. Although an 11,000-foot exploratory well showed inconclusive evidence of commercial quantities of gas in the Nenana Basin, Doyon hopes to do more seismic work in that area.
Doyon is working with Canadian junior mining companies Full Metals Minerals and FreeGold Ventures and Newmont to explore its lands for gold, silver, zinc, lead and copper. Exploration is continuing in 2011.
Its tourism holdings, including a joint venture with ARAMARK Sports and Entertainment Services, which holds the major concession contract at Denali National Park, showed the effects of the national recession. Doyon's tourism subsidiary also owns Kantishna Roadhouse and Denali River Cabins in the park region. Revenues for all tourism-related holdings were $3.7 million in 2010, on par with $3.5 million in 2009, but well below the $5.3 million it garnered in 2008.
In 2010, Doyon sold its stake in Angeles Composite Technologies, which manufactures aerospace components. It contributed $198,000 in earnings.
Doyon contributed $1.4 million to its nonprofit Doyon Foundation.
In a letter to shareholders, Doyon President/CEO Norm Phillips and Chairman of the Board Orie Williams said the corporation has adopted two major five-year goals. One is to boost shareholder hire by a third to 800; the second is to increase pre-tax net income to from $30 million to $50 million.
Koniag Inc. moved into its spacious new offices on Near Island, across the harbor from Kodiak in 2010. The 13,500-square-foot building, which it shares with the Kodiak Area Native Association, marks the corporation's commitment to its roots in the region, said Will Anderson, president and CEO.
Koniag saw substantial growth in 2010, fueled in large part by strong performances from its diversified subsidiaries. Revenues increased 29 percent to nearly $150 million, with net revenues up 4 percent.
The bulk of the revenue is through Koniag's operating companies under the umbrella of Koniag Development Corp. Of the $136 million in revenue from these companies, 71 percent is from operations that provide services for federal agencies. Its information technology and telecommunications subsidiaries alone had an 82 percent increase in revenue. The corporation continues to fight to keep Alaska Native preferences intact for government contracts under the Small Business Administration 8(a) program.
According to Anderson, "We have a large base of our shareholders who grew up in a village and have no intention of leaving that village. The 8(a) program is important there as well because it creates an opportunity to pay dividends to those individuals living a subsistence lifestyle in a rural village."
The corporation maintains a strong real estate portfolio, adding properties in Virginia and Texas, and expects strong growth in that sector. Its investment portfolio returned earnings of $5.4 million, a turnaround from the $6.9 million loss it sustained in 2009.
Locally, Koniag and the Larsen Bay Tribal Council built two 638-square-foot cabins on the upper Karluk River to accommodate hunters, fisherman and outdoors enthusiasts, as well as shareholders. The project is designed to help shareholders develop guiding businesses without having to build their own lodge facilities.
NANA Regional Corp.
NANA Regional reported its highest ever revenues in 2010, $1.6 billion. Net income was $41.17 million.
The Northwest Alaska corporation with more than 12,500 shareholders, paid out $20.5 million in dividends. It earned $146.3 million from the giant Red Dog zinc mine, of which $82 million was distributed to the other corporations under the 7(i) resource sharing provision in ANCSA.
Red Dog mine, which is an economic engine for Northwest Alaska, got an extension when operator Teck Alaska Inc. announced it planned to develop the Aqqaluk deposit. The lead and zinc deposit holds an estimated 51.6 million tons of reserves and is expected to provide another 20 years of mining in the region. Nearly 350 NANA shareholders work at the mine, 58 percent of the workforce.
Another local project is the construction of a new Nullagvik hotel in Kotzebue, which is scheduled to open in 2011. Six NANA subsidiaries were involved in the design and construction of the hotel.
NANA also paid out more than $800,000 in scholarships to 275 NANA shareholders and approved a special $2,000 payment to each shareholder over age 65 under the NANA Elders' Settlement Trust.
Wholly owned subsidiary NANA Development Corp.'s diverse business operations span the globe, employing more than 13,400 people, including 5,000 Alaskans. Of those, 1,315 were shareholders, who earned approximately $48.1 million in wages.
The government services industry was a driver for Sealaska in 2010. The Juneau-based corporation saw revenues of $223.8 million, up from $196.02 million in 2009. Services accounted for just more than half the revenue. Net income dropped to $15.15 million from $20.29 million.
Land was a major focus for Sealaska in 2010, as it pushed to get the final piece of its remaining ANCSA land entitlement through Congress. The 79,000-acre parcel will give it an opportunity for long-term, economically sustainable logging operations in the region, according to Jaeleen Araujo, vice president and general council of Sealaska.
Sealaska is looking to create economic opportunities in Southeast Alaska through its Haa Aani subsidiary. It helped establish oyster farms, increased shareholder employment at its Alaska Coastal Aggregates operation, which supplies construction materials. With Kake Tribal Corp., it's refurbishing a fish-processing facility in Kake. Haa Aani is also investing in alternative, renewable energy projects such as biomass, hydroelectric and tidal energy.
Sealaska converted its headquarters in Juneau from an oil boiler system to a renewable wood-pellet system in 2010, and hopes to create a market and infrastructure for wood-pellet heating in the region.
A strong timber market in Asia helped Sealaska Timber Corp. launch a second-growth harvest program, which provided 20 percent of the total harvest of 70 million board feet, the highest since 2006.
Sealaska's government contracting subsidiaries continued to perform well. It acquired Security Alliance, which provides security guard services in 2010. The subsidiary was named the 2010 Small Business Prime Contractor for the U.S. Department of State. Sealaska Constructors, which provides design, construction, infrastructure and environmental remediation services, had a stellar year, earning the "Commanders Coin," a high honor usually reserved for Army Corps personnel and rarely given to civilians, according to a news release. Overall, the services segment provided $112.3 million in revenue in 2010, over $84.5 million in 2009, with a $3.06 million profit after a $2.11 million loss in 2009.
Sealaska's gaming segment lost $4.68 million in 2010, after a $2.76 million loss in 2009.
The 13th Regional Corp.
The 13th corporation, created for shareholders living outside Alaska, has not filed any financial reports or had any communication with shareholders for several years.
For more information visit the Alaska Business Monthly Magazine.