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ANCSA corporations: how they fared in 1989.

ANCSA Corporations

Last year was a year of adaptation for the state's 13 Native regional corporations and for larger Native village corporations. When the Exxon Valdez leaked almost 11 million gallons of oil into Prince William Sound, corporations that ordinarily relied on the seafood industry to generate the majority of their revenues found diversification crucial to ensure economic survival.

Because of losses suffered in the seafood industry, Sealaska Corp. in 1989 made the decision to sell Ocean Beauty Seafoods Inc., formerly its largest revenue-producing subsidiary. Chugach Alaska Corp., although it too suffered heavy losses from its seafood operations, was able to report a profit by providing support services during the cleanup effort that followed the March 24, 1989, oil spill.

Also offsetting cannery losses were earnings gained in a strong timber market. Both Chugach Alaska and Sealaska profited from increased demand and higher timber prices, as did Klukwan Inc.

Development of natural resource assets continues to be a common Native corporation priority. Efforts are focused on oil and gas exploration and development as well as on quantifying and producing from mineral deposits on lands conveyed by the 1971 Alaska Native Claims Settlement Act (ANCSA).

Among those developing natural resource assets are Cook Inlet Region, with its Kenai Peninsula oil reserves and coal reserves in the Wishbone Hill area, and NANA Regional Corp., with production at its Red Dog Mine, now in the startup phase. Other firms still are inventorying such assets or looking to acquire them. Koniag Inc., for example, is seeking to gain oil and gas development rights in the Arctic National Wildlife Refuge through a land exchange.

For many ANCSA corporations, comparisons of 1988's and 1989's financial reports reflect the loss of tax benefits from sales of net operating losses (NOLs) that were permitted by Congress in the Tax Reform Act of 1986. In such transactions, many profit-making Lower 48 firms bought the losses to lower their tax bills and shared the tax savings with the Native Corporations. SAles of NOLs enabled many struggling regional and village firms to increase cash holdings and achieve profitability. Except for a few special-case extensions, Congress halted the NOL sales in 1988.

Following are brief financial profiles of the state's 13 Native regional corporations and 2 of the largest village corporations. Because fiscal years varied widely, research for this report used the fiscal year that reflects the most months in calendar year 1989. The primary source for financial information was annual reports published by the Native corporations. Other sources were telephone interviews and mail surveys.

AHTNA INC.

Ahtna Inc. of glennallen experienced a roller-coaster year for earnings in 1989. After record net earnings of $4.1 million realized by the sale of NOL tax benefits in 1988, the corporation tallied only $163,858 in 1989 net earnings. As a result, dividends paid to shareholders declined from $22.64 in 1988 to $.92 in 1989.

Extraordinary income items such as NOLs are a thing of the past, and the corporation was forced to rely on the income from its operations. Ahtna's total operating revenues for 1989 were $7.9 million, up 22 percent from $6.5 million in 1988. A construction subsidiary, Ahtna Enterprises Corp., completed construction of the Riley Creek Visitors Access Center in Denali National Park under a $3.4 million contract, but suffered losses overall.

Alaska Security Inc., a commercial security subsidiary, also operated at a loss for its second consecutive year. A new contract with Carrs Quality Centers is expected to help the subsidiary turn the corner toward profitability.

On a more successful note, the joint venture H.C. Price Construction received a 15-year contract for total maintenance of the trans-Alaska pipeline. In addition, the subsidiary Ahtna Construction and Primary Products Corp. reported a profit this year for the first time since construction of the trans-Alaska pipeline was completed and just won a 15-year extension on a pump station maintenance agreement.

ALEUT CORP.

The Aleut Corp. of Anchorage owns land on the Alaska Peninsula and the Aleutian, Shumagin and Pribilof islands. Managing and extracting sand, gravel and rock aggregates as part of its subsurface rights within the region has provided a source of revenue, but the corporation's principal activities have been in real estate.

For the year ending March 31, 1990, revenues from the development and sale of real estate, operation of office buildings, aggregate sales, trailer court operations and investment income were $3.9 million, up 86 percent from $2.1 million the prior year. A $2.3 million operating loss in 1989 is attributed primarily to a write down of $800,000 on real estate holdings to reflect current estimated market value. Aleut closed an unproductive California subsidiary, the Second Co. of San Diego, to halt continuing losses.

Because debt has been reduced, Aleut Corp.'s interest expenses will fall over the next year. Overall, management considers the corporation to have settled old accounts and to be well-positioned for the future. It has contracted with a mining company to explore corporation lands for gold.

In April Aleut corp. formed a new subsidiary, Baidarka Corp., to provide construction and construction-related services. The venture is expected to concentrate efforts in the corporation's region, on Aleutian chain projects such as military and U.S. Coast Guard work and on fishing-related construction for private industry. The subsidiary also offers a means of creating shareholder employment.

ARCTIC SLOPE

REGIONAL CORP.

The revenues of the northernmost Native regional corporation, Arctic Slope Regional Corp. of Barrow, increased 20 percent from 1988's $93.7 million to $112.8 million for fiscal year 1989, which ended June 30, 1989. Net income rose 80 percent from $8.1 million to $14.5 million in 1989.

The corporation's Arctic Slope Consulting Group, offering engineering and architectural design services, posted record-high revenues and profits. It continued to expand its technical capabilities with the addition of geophysical services, including the availability of computer-based seismic analysis systems.

Natchiq Inc., a subsidiary specializing in oil-field and construction services, also enjoyed a profitable year. Declines experienced by the subsidiary's union contracting arm, Houston Contracting Co., were offset by oil-spill cleanup and other environmental projects handled by VRCA Environmental Services, work landed by Alaska Petroleum Contractors, and the increased activity generated by Prudhoe Bay Commercial Center's expansion.

ASRC's Executone of Alaska subsidiary also expanded, acquiring Aurora Communications, a radio, microwave and satellite communications company. Since the close of fiscal year 1989, ASRC also purchased the remainder of Petro Star Inc., a North Pole refinery. That acquisition could become a very useful property if ASRC someday is permitted to develop potential oil and gas deposits on the Coastal Plain of the Arctic National Wildlife Refuge.

ASRC also hopes in future years to tap its vast coal resources and has been conducting sample mining to prove the quality of the reserves.

BERING STRAITS

NATIVE CORP.

Coming off last year's $37 million in revenues, Bering Straits Corp. of Nome reported a drastically reduced figure of $1.13 million for the year ending June 30, 1989. Boosting revenues for the previous year were sales of NOLs.

With reorganization due to a Chapter 11 bankruptcy filed in 1986 now behind it the corporation appears on its way to economic strength.

For the future, Bering Straits expects to focus considerable attention on mineral exploration. On the international scene, a joint venture mining operation with the gold mining association of Magadan, U.S.S.R., is expected to capitalize on the corporation's large placer gold reserves. The U.S. partner of the joint venture, called Svzal, is Bering Straits Trading Co., which the Native regional corporation owns with Anchorage's Greatland Exploration.

BRISTOL BAY

NATIVE CORP.

For the year ending March 31, 1990, Bristol Bay Native Corp. reported $34.6 million in revenues, up 8 percent from the previous year. With its primary goal being to gain financial stability, the corporation was able to turn declining revenues around. After a loss of $4.7 million for the year ending March 31, 1989, the corporation reported a gain of $934,000 from operations in the following year.

Bristol Bay owes its productive year to improve results from the troubled Anchorage Hilton Hotel, increased investment income and a reduction of corporate and general administrative expenses. Still a trouble spot for the corporation is Tyrrell's, a petfood manufacturing plant, which reported losses of $200,000 and still continues under a negative cash flow.

CALISTA CORP.

Although Calista Corp. of Anchorage reported lower total revenues of $4.9 million for 1989, a 74 percent drop from the previous year, the corporation was able to show a profit of $180,000. This is good news for a company that has suffered heavy losses for the past three years.

The gain was due to the company's divestment of cash-intensive investments; namely the Anchorage Sheraton Hotel and Calista Seafoods Inc., a surimi plant in Bellingham, Wash.

Calista looks toward a future of strengthening existing operations and steering the company away from widespread diversification into unfamiliar areas. Intraregional investment also is expected to increase profitability and shareholder employment.

CHUGACH ALASKA

CORP.

Chugach Alaska Corp. of Anchorage continued its profitable trend for the fourth year in a row. The corporation posted a 15 percent increase in operating revenues with 1989's $57.2 million. Despite losses incurred by its seafood processing subsidiaries due to the oil spill, Chugach Alaskan was able to boost its overall revenues by $19 million and to report profits in excess of $5 million by providing support services during the cleanup effort. The firm joint ventured with NANA-Marriott to operate catering and housekeeping services for cleanup camps under the name Chugach-NANA/Marriott.

Fulfilling part of its long-term planning strategy, Chugach Alaska began its first year in the forest products business through the operations of subsidiaries Chugach Timber Corp. and Chugach Fores Products. First-year forst product revenues were a modest $3.8 million, but 1990 revenues are expected to exceed $34 million. Chugach Alaska's $20 million Seward sawmill began producing wood chips and dimensional lumber in January.

COOK INLET

REGION INC.

Cook Inlet Region Inc. of Anchorage earned record profits of $35 million in 1989 due largely to a settlement of royalty disputes involving Southcentral oil and gas fields. Total revenues for 1989 were $57.9 million, an 11 percent increase over 1988. Last year also marked an all-time high dividend of $16.76 per share.

First and foremost, CIRI is a natural resource company, and the successes of 1989 resulted primarily from activities in these areas. Peak Oilfield Service Co., a joint venture operating on the North Slope, reported its second year of profitability.

Also, CIR entered into a multi-year contract for the sale of its Kenai Peninsula timber, which is expected to earn $6 million. Another first-ever accomplishment this year: The company directly marketed its gas to the Tesoro refinery on the Kenai Peninsula and to the Endicott Power Plant on the North Slope. A 20-year lease of coal reserves in the Wishbone Hill area has been finalized with Idemitsu Alaska Inc., a subsidiary of a Japanese company.

Along with its natural resource developments, Cook Inlet Region boasts wide-ranging operations that include real estate holdings and broadcast operations in the Lower 48. Cook Inlet Region owns 3 television stations and 11 radio stations, making it the natiom's largest minority-owned broadcaster.

DOYON LTD.

Doyon Ltd. of Fairbanks in 1989 experienced its second most profitable year and its fifth consecutive year of profitability. The corporation posted net earnings of $11.3 million in 1989 and declared a cash distribution of $1.35 per share. Gross revenues for the year were $45.6 million.

Contributing $8.7 million to the corporation's operating revenues of $34.2 million in 1989 was Doyon Drilling Inc. Joint Venture. In September a fourth drilling rig was added to the venture's fleet.

Other sources of income were investments and revenues from natural resource exploration Doyon lands. A new mineral exploration agreement signed last year gives the corporation agreements with four companies and raises the total acreage under lease for hard-rock mineral exploration activities to 4.5 million acres. The firm expects additional agreements in 1990 and beyond.

In 1989 Doyon acquired the former Alliance Bank building in Fairbanks, which now serves as its headquarters and provides Class A office space to lease.

KONIAG INC.

Although Koniag Inc. of Anchorage reported its sixth consecutive year of profitability for the period ending March 31, 1990, net earnings of $1.02 million were significantly lower than the previous year's net earnings of $10.8 million. The decrease represents a fiscally conservative attitude by a corporation that can no longer rely on the sale of NOLs to boost earnings.

Koniag continues to look toward development and management of its ANCSA-conveyed lands to provide any significant future income. The corporation is aggressively pursuing an exchange of its holdings in the Kodiak National Wildlife Refuge for oil and gas development rights in the Arctic National Wildlife Refuge.

Koniag's liquidity and cash position continue to show strength, and while current assets decreased by 5 percent, from $3.9 million for the fiscal year ending March 31, 1989, to $3.7 million for the following year, the company's current liabilities also decreased by the much larger margin of 12 percent, from $1.6 million to $1.4 million.

A variety of sources generate revenue for the corporation, the largest being $1.5 million from interest and investment income, as well as 7(i) receipts (Native corporation revenue sharing) and dividends. Total revenues for the year ending March 31, 1989, were $2.75 million, compared with $13 million for the most recent fiscal year.

NANA REGIONAL

CORP.

Continuing on its upward trend, for the period ending June 30, 1989, NANA Regional Corp. of Kotzebue reported a net income of $1.7 million, up slightly from $1.2 million the previous year. This gain represents a continuing recovery from losses of $1.9 million suffered in 1987. The corporation also reported a 28 percent increase in revenues, to $31.6 million in its fiscal year 1989.

A significant portion of NANA's profit this year resulted from joint ventures and activities in the oil industry. In particular, NANA profited from activities in oil-well drilling, food services and mineral exploration. The newly created joint venture Chugach-NANA/Marriott Corp. was profitable as well.

Still troubling NANA are losses suffered in the seafood industry, which the corporation attributes to falling prices of chum salmon and increased competition from pen-raised salmon. Also contributing to the loss column were the corporation's Nullagvik Hotel and Jade Mountain Products.

For NANA the future will bring continued development of the Red Dog Mine with partner Cominco Alaska. Production at the mine started recently and should bring increased royalties from Cominco as well as provide permanent employment opportunities for shareholders.

SEALASKA CORP.

For the period ending March 31, 1990, Sealaska Corp. of Juneau reported total revenues at $110.7 million, a 59 percent decrease from the previous year. The sharp decline is the result of the decision by Sealaska accountants not to include revenues for seafood product or building material subsidiaries ($177 million and $8.5 million, respectively) in figures for the most recent year.

Ocean Beauty Seafoods, formerly the largest revenue generator for the corporation, lost money in 1989 due to fishery closures and lower prices. Sealaska announced in July it had reached an agreement to sell the seafood processing and distributing company to an Indonesian firm.

The operating assets of Alaska Aggregate Corp. (Alagco) were liquidated or transferred to Fairbanks Sand and Gravel, Sealaska's other building materials business, last year. The corporation plans to sell Fairbanks Sand and Gravel, which has facilities in Anchorage, Fairbanks and Palmer.

Altough Sealaska's total earnings of $16.8 million were down 40 percent from the previous year, considering the lack of NOL benefits, the figures reflect a stable year. Following a recent corporate restructuring and streamlining, Sealaska's investment holdings emerged as the largest contributor to earnings with $12.1 million.

Future prospects hinge largely on the timber industry. Timber sales totaled $95.5 million for the most recent fiscal year, up from $68.4 million for the year ending March 31, 1989. The harvest of 98.7 million board feet also reflected to brokering activity by Sealaska.

THIRTEENTH

REGIONAL CORP.

The Thirteenth Regional Corp., representing Alaska Natives living outside the state, reported modest revenues again this year. The corporation's revenues in 1989 totaled $713,543, up 53 percent from 1988's $465,792. Without the sale of NOLs, the corporation had to rely oin operations for money-making.

Headquartered in Vancouver, Wash., Thirteenth Regional does not operate in quite the same fashion as the other regional corporations. The corporation was not granted extensive land claims as the other corporations were, and little emphasis is placed on providing social services to shareholders, a feature often considered a liability by the other regional corporations.

Thirteenth Regional has a master franchise agreement with Mailboxes Etc. to operate a mailbox and message service businesses in regions of Washington and Oregon. Another revenue source is real estate holdings in Cold Bay and Vancouver, Wash.

KLUKWAN INC.

Billing itself as Alaska's most diverse and prosperous Native village corporation, Klukwan Inc. of Juneau reported total revenues of $107.1 million in 1989, up 31 percent from 1988. This corporation also boasts $123.8 million in shareholder equity and a "permanent fund" of $62.1 million.

The state's largest logger, Klukwan was able to capitalize on the industry's strong demand and prices last year. Subsidiary Klukwan Forest Products Inc. purchased a plywood production company in Port Angeles, Wash., now named K-Ply Inc.

Klukwan entered into a joint venture -- Klukwan-Sino Inc. -- with the China State Investment Corp. of Forestry, a branch of the Chinese government, to conduct logging operations and to export timber. the firm is considering construction of a sawmill in Ketchikan to handle timber for export to China and other markets.

Also contributing to Klukwan's success last year was West Coast Stevedoring Corp. The subsdiary's sales exceeded $5 million in 1989, and its long-shoremen loaded more than 148 million board feet of logs onto ships.

UKPEAGVIK INUPIAT

CORP.

It was another year of business as usual for Ukpeagvik Inupiat Corp. of Barrow, one in which every subsidiary again contributed to the corporation's profitability. For the period ending June 30, 1989, the Native village corporation reported total revenues of $32.3 million, up 28 percent from the previous year's figures of $25.2 million.

With lowered expenses and virtually no debts, UIC was able to again focus on shareholder employment. For 1989, 80 percent of all employees were sharholders. Overall, 1989 proved to be another stable year. One bright spot in a lineup of numerous successful operations was Piquniq Management Co., a joint venture providing project services to the U.S. Department of Defense and other federal agencies, whose revenues jumped 67 percent in 1989.

Looking ahead, Ukpeagvik expects 1991 to be the biggest year yet. The corporation anticipates increased activity in Barrow from four off-shore oil rigs, two school projects and gas field developments.
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Article Details
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Title Annotation:Alaska Native Claims Settlement Act
Author:Jones, Arlitia; Griffin, Judith Fuerst
Publication:Alaska Business Monthly
Article Type:Cover Story
Date:Nov 1, 1990
Words:3178
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