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ANCSA corporations: a 1990 portrait.

Alaska's 13 Native regional corporations and larger Native village corporations experienced wildly varying fortunes in 1990. Arctic Slope Regional Corp. almost doubled its revenues and set its sights on a $1 billion mark in sales by the end of the decade; Chugach Alaska Corp.'s liquidity problems worsened in 1990 and sent the company into Chapter 11 bankruptcy in March 1991.

In 1990, Native corporations that were established in 1971 by the Alaska Native Claims Settlement Act relied on normal operations for revenues. There were no windfalls such as the Exxon Valdez oil-spill cleanup, nor were sales of net operating losses (NOLs) to profitable Lower 48 firms allowed.

Many ANCSA corporations concentrated on lowering debt and improving operating efficiency. Unprofitable enterprises were sold or revamped, and many new ventures were launched in service-related fields, often outside Alaska.

Not surprisingly, almost all Native corporations are involved in the development of their chief assets -- natural resources such as oil and gas, timber and minerals. Cook Inlet Region Inc. and Doyon Ltd. continued to explore and develop their petroleum resources. Aleut Corp., Bering Straits Native Corp. and Doyon are positioning to tap gold and other hard-rock minerals for future revenues. NANA Regional Corp. celebrated the opening of its Red Dog Mine, but realized scant revenues from the project.

In 1990, Native corporations divested seafood processing operations. Sealaska sold its Ocean Beauty seafood group last year, and troubled Chugach Alaska sold off its inventory of fish and shortened the processing season at its Cordova plant.

Native corporations involved in the timber industry -- such as Chugach, Sealaska and Klukwan -- are working to move into more value-added areas of forestry or to enter new businesses such as construction and mineral development.

The "permanent funds" of many corporations posted large earnings. These savings accounts, typically fashioned as investment portfolios of stock in other companies, have helped several firms more easily weather the boom-and-bust cycle of Alaska's natural resource industries. For NANA Regional Corp., investments were its largest source of income. Several other companies note that their portfolios performed well.

Several Native regional corporations received much of their net income from the revenue-sharing provisions of Section 7(i) of ANCSA. This section was included in the law because natural resources were not evenly distributed among Native lands. Section 7(i) provides that 70 percent of natural resources from any Native regional corporation's ANCSA lands be shared with other regional corporations that would in turn share them with their shareholders and village corporations.

Alaska's Native corporations face a variety of challenges for the future. Increased competition on the NOrth Slope has forced Native-owned oilfield service companies to cut prices, and reserves there are declining. Many of the corporations are working with the federal government to exchange their ANCSA lands for oil and gas drilling rights in the Arctic National Wildlife Refuge, should Congress approve development there. The fishing industry is plagued with high inventories and low prices. The logging industry is facing declining stands of timber.

Following are brief financial profiles of the state's 13 Native regional corporations and 2 of the largest village corporations. Because fiscal years vary widely, research for this report used the fiscal year that reflects the most months in calendar year 1990. 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., based in Glennallen, had a mixed year in 1990. Although 1989 revenues of $7.9 million decreased 25 percent to $5.9 million in 1990, net earnings were up 13 percent, from 1989's $163,858 to $185,153 in 1990. Earnings per share for the company, profitable every year since 1974, rose from $.92 per share to $1.03 per share, a 12 percent increase.

Subsidiary Ahtna Construction & Primary Products Corp. had another profitable year and was able to pay a first-ever dividend of $100,000 to the parent company. AC&PPC owns 30 percent of H.C. Price/Ahtna. The income from the joint venture, which provides maintenance of the trans-Alaska pipeline, remains the foundation for Ahtna's profitability.

H.C. Price/Ahtna has returned approximately $1.2 million in profit to AC&PPC on an original investment of $600,000. Alyeska Pipeline Service Co. has extended the pipeline maintenance contract through 1991. Price/Ahtna also won a two-year maintenance and oil-spill response contract at the Valdez terminal.

Other Ahtna subsidiaries were not so profitable in 1990. Ahtna Development Corp., which has done well in a joint venture to provide life-support services throughout camps in rural Alaska, was underbid and lost its Alyeska catering contract. Alaska Security Inc., a wholly owned subsidiary providing armored car and security services, failed to show a profit. In August 1991, Alaska Security sold its armored car division and is now debt-free.

In the last quarter of 1990, Ahtna Inc. began converting its former lodge in Glennallen to an office complex for various state government departments. Having signed a five-year lease with another five-year option, company managers expect these rents to help reduce overhead costs.

ALEUT CORP.

Anchorage-based Aleut Corp., which owns land on the Alaska Peninsula and Aleutian, Shumagin and Pribilof islands, receives most of its revenues from its real estate holdings in Anchorage, Valdez and the Matanuska-Susitna Valley. The firm also extracts and sells sand and gravel.

For the year ending March 31, 1991, revenues for Aleut Corp. soared to $7.2 million from $3.9 million the prior year, an 85 percent increase. The corporation last year received $2.7 million in reparations for the loss of Attu Island, which was occupied by the Japanese in World War II. That payment, along with $1.5 million in payments in accordance with Section 7(i) of the ANCSA, enabled Aleut Corp. to wipe out its debt.

In 1990, Aleut Corp. acquired Baidarka Corp., a construction company, and Space Mark Inc., a firm providing technical consulting services for federal government operations and for maintenance contracting. Both companies lost money in 1990 due to startup and moving costs, but Aleut officials expect Baidarka to be profitable in the current fiscal year and Space Mark to operate at the break-even level for the next two or three years.

Aleut has contracted with Battle Mountain Gold Co. to search for gold on Unga and Unalaska islands. Also, the firm has reached an agreement with the U.S. Interior Department to exchange Aleut lands for oil and gas rights in the Arctic National Wildlife Refuge. If ANWR is opened to development and Congress approves the land exchange, Aleut Corp. could realize substantial royalty benefits from discoveries of commercial quantities of oil and gas.

ARCTIC SLOPE REGIONAL CORP.

The northernmost Native regional corporation, Arctic Slope Regional Corp. of Barrow, saw its revenues soar 94 percent, from $112.8 million in 1989 to $218.3 million for the year ending June 30, 1990. Earnings rose 76 percent from $14.5 million in 1989 to $25.5 million in 1990, and income per share increased from $19.26 per share in 1989 to $25.49 per share.

ASRC's ambitious management has announced a goal of $1 billion in sales by the end of the decade. Oilfield services and natural resource development are the keystones of ASRC's operations. ASRC Construction Inc., which provides oilfield support services, led company subsidiaries in profits.

ASRC also operates such diverse businesses as cable television, tourism, construction and manufacturing. The Arctic Slope Consulting Group, ASRC's engineering branch, posted record revenues and profits in 1990 and opened new offices in Juneau, Seattle and Albuquerque, N.M.

Last year ASRC established Arctic Slope Inspection Services, specializing in corrosion detection, monitoring and engineering for pipeline systems. The company has found work in Alaska, West Coast states, the Midwest, the southeastern United States, and in the Pacific Rim countries of Indonesia and Malaysia.

SKW/Eskimos, a construction subsidiary, had a successful year operating partnership projects with several village corporations. Shareholder hire on these and other ASRC activities exceeded 60 percent, providing employment income to shareholders and business opportunities to village corporations.

BERING STRAITS NATIVE CORP.

Bering Straits Native Corp. of Nome enjoyed its third consecutive profitable year. A profit of $1.1 million enabled the company to declare a $.50 per share dividend.

The firm posted a 52 percent revenue increase, from $2.9 million in 1989 to $4.4 million for the year ending June 30, 1990. Section 7(i) revenues contributed $1.2 million.

BSNC was forced into Chapter 11 bankruptcy in March 1986, but in 1988 the court and creditors approved a reorganization plan, which was completed in January 1989. Sales of TABULAR DATA OMITTED tax net operating losses in 1988 brought BSNC $27.7 million in revenues and helped position the company for growth.

Basically a land holding company, BSNC is working to prove gold mining reserves on its lands. Subsidiary Bering Straits Trading Co. is a partner in a joint venture with the gold mining association of the city of Magadan, U.S.S.R. Other enterprises include a 250-space trailer park in Valdez, an aircraft hangar in Unalakleet and a rock quarry.

BRISTOL BAY NATIVE CORP.

Although Anchorage-based Bristol Bay Native Corp. reported only a modest increase of 3 percent to $35.6 million in revenues for the year ending March 31, 1991, net earnings rose 43 percent. The increase, $1.4 million to $2 million last year reflects improved operating earnings. This profit enabled BBNC to raise the December 1990 dividend paid to shareholders 9 percent.

The foundation of BBNC's operations is the Anchorage Hilton Hotel, which continued to improve in 1990. Revenues increased 12 percent to $21.5 million, mostly the result of higher room revenues. Debt modification, which reduced interest expense, made a significant improvement in the net results. For the first time since BBNC bought the hotel in 1977, cash flow was sufficient for normally scheduled debts and to fund $1.5 million in capital improvements and repairs.

BBNC's natural resource revenues increased 86 percent to $2.6 million because of larger Section 7(i) revenues from other Native regional corporations. But Tyrrell's Inc., the company's Seattle-based petfood subsidiary, recorded an even worse year than its $200,000 loss in 1989, losing $617,000 in 1990. BBNC investment income also was $2 million lower in 1990.

Bristol Bay faces several uncertainties. The firm's management worries that withdrawal of foreign air carriers from Anchorage International Airport will reduce hotel occupancy and expects Section 7(i) revenues to decrease. On the bright side, 1990 corporate and administrative costs were down $1.9 million, marking the lowest such expenses in 10 years, and long-term debt has been reduced.

CALISTA CORP.

Calista Corp. of Anchorage posted a profit of $1.8 million in 1990, compared with $180,000 for 1989, primarily due to increased Section 7(i) revenues from other Native regional corporations. The company also reported revenues of $6 million for the year ending Dec. 31, 1990, an increase of 13 percent from the prior year's $5.3 million.

Calista Well Services Inc., a joint venture providing workover rig services to companies on the North Slope, earned more in 1990, as did Stewart Title Co. of Alaska and Fairbanks Title Agency Inc. Together, Calista Corp.'s joint ventures and subsidiaries contributed income of $435,000. Calista also managed to reduce long-term debt by $2.7 million last year.

Calista's managers are trying to reduce dependence on unreliable Section 7(i) revenues and to increase income from operations. They expect the company to be more active in oilfield service and to invest more in Bethel-area ventures.

CHUGACH ALASKA CORP.

Chugach Alaska Corp. of Anchorage had a very rough year in 1990. The company's revenues slid from $57.2 million in 1989 to $46.9 million for the year ending Dec. 31, 1990, a drop of 18 percent. Chugach Alaska posted net losses of $25.3 million, of which $22.5 million was from ongoing operations.

The 1990 losses, combined with the cost of completing the firm's new Seward sawmill, created severe liquidity problems for Chugach. Total debt increased 152 percent, and the company faced lawsuits for collection of loans and increased pressure from vendors for bills due. As a result, Chugach filed for bankruptcy on March 11, 1991.

Chugach still faces the expense of continuing litigation to collect damages from Exxon for losses caused by the Exxon Valdez oil spill. The Chugach-NANA/Marriott joint venture, which provided supplies for spill cleanup workers, was discontinued last year.

Subsidiary Chugach Fisheries Inc. has suffered from industrywide high inventories of pink salmon and low market prices. Chugach Forest Products, the firm's other main subsidiary, saw a slow startup of production at its Seward sawmill. This low volume, combined with depressed lumber prices, caused substantial losses. Company logging operations, particularly in Icy Bay, also generated large losses in 1990. Recently, in October, management severely curtailed work at the Seward sawmill, citing low prices in the Alaska market and a decision to reduce inventories.

For the future, Chugach managers hope that staff reductions, lowered expenses and a debt reduction of $10 million will make its reorganization plan work. Chugach Fisheries has sold its inventory. A fish processing plant at Uganik has been leased, and the firm's managers expect to process only fresh and frozen fish at Cordova in a short operating season.

COOK INLET REGION CORP.

Cook Inlet Region Corp. of Anchorage earned profits of $35.7 million in 1990, marking its 14th consecutive year of increasing profitability. Revenues leaped from $57.9 million in 1989 to $99.1 million in 1990, a 71 percent increase, and the company paid a record dividend of $17.62 per share.

Since its founding, CIRI has focused on managing and developing its oil and gas holdings. Recently the company has begun to move from royalty owner to active participant in the oil and gas industry. For the first time, subsidiary CIRI Production Co. fully managed the drilling of a new natural gas development well in the Kenai National Wildlife Refuge.

Through a wholly owned subsidiary, CIRI Drilling Co., CIRI owns interests in two North Slope drilling rigs, both of which were active in 1990. Cook Inlet also owns an interest in Peak Oilfield Services Co., which had its third year of profits and increased revenues by 20 percent over 1989.

During 1990, subsidiary CIRI Land Development Co. worked on a 60-acre industrial park on the island of Oahu in Hawaii, but was forced to temporarily shelve plans for an office park in Miami. CIRI owns real estate development firms in Alaska, Virginia and Georgia, and conducted real estate transactions in Louisiana, Florida, California and Arizona last year.

The regional corporation owns television stations in Connecticut and Tennessee and nine radio stations throughout the country. New ventures by CIRI in 1990 included North Pacific Mining Corp., established to manage and market the company's extensive Alaska mineral properties, and Cook Inlet Energy Supply, a Lower-48 natural gas marketing firm that quickly won a contract to supply 10 million cubic feet per day in Southern California.

DOYON LTD.

Fairbanks-based Doyon Ltd. recorded a revenue gain of 8 percent, from $45.6 million in 1989 to $49.3 million for the year ending Sept. 31, 1990. The company experienced its sixth consecutive year of profitability, with earnings of $10.4 million, down 9 percent from 1989. Doyon declared a $1.50 per share cash distribution.

Doyon Drilling Inc. JV remains the most profitable operation of the company and earned more than $6 million on revenues of $36.3 million last year. The joint venture, which operated four active rigs on the North Slope in 1990, also paid more than $16 million in salaries to shareholders.

The regional corporation's natural resource revenues rose to $2.4 million in 1990, largely from oil and gas exploration leases in the Kandik-Nation Rivers area. Mineral exploration continued on Doyon lands, and four companies invested $8.1 million on hard-rock projects, ranging from initial exploration to intensive drilling programs. Doyon also negotiated sales of sand, gravel and rock.

In addition, Doyon owns several commercial real estate properties in the Fairbanks area, including the former Alliance Bank building, now the Jimmy Huntington Building. The Class A office building, acquired in 1989, registered a profit during its first year of Doyon ownership.

KONIAG INC.

Koniag Inc. of Anchorage posted net earnings of $3.6 million for the year ending March 31, 1991, 260 percent more than the prior year's $1 million. Although 1990 was the company's seventh straight profitable year, Koniag had losses of $23 million in the years prior to 1984, and still has negative retained earnings of $1.85 million. The regional corporation's board of directors has announced that no dividend will be declared until Koniag can do so out of accumulated earnings while in a satisfactory cash position.

Natural resource revenue from Koniag's ANCSA lands on Kodiak Island was the corporation's single largest source of operating income during 1990. Koniag also received $1.5 million in Section 7(i) revenues from other Native regional corporations and earned $1.5 million in interest and investment income in 1990.

Koniag's total revenues of $5.8 million last year include $2.5 million realized from a complicated land sale that enabled the corporation to acquire an interest in Afognak Joint Venture, a timber harvesting business formed with village corporations in the region.

A wholly owned subsidiary of Koniag, Kazim Co., sold land to the city of Kodiak last year. Koniag also continued to pursue land trades with the federal government that would acquire oil and gas drilling rights in the Arctic National Wildlife Refuge.

NANA REGIONAL CORP.

NANA Regional Corp. of Kotzebue had another good year, posting a 1990 profit of $3.1 million, an 82 percent increase from 1989's $1.7 million. Revenues also rose, to $42.6 million for the year ending June 30, 1990, from $31.6 million the prior year. The company declared its 13th consecutive dividend of $2.50 per share for 1990.

NANA's largest source of revenues last year was investment securities. The value of its portfolio increased 13 percent to $28.7 million.

Resource revenues, largely from Section 7(i) payments from other Native regional corporations, constituted NANA's second most lucrative source of income. Sand and gravel sales were minimal, as were royalty payments for the Red Dog Mine project. Oil leases on NANA lands were dropped after modest contributions to revenue.

NANA's joint ventures had a better year overall in 1990 than in 1989, but the news wasn't all good. The previously profitable Chugach-NANA/Marriott joint venture that provided food and housekeeping for oil-spill workers was discontinued. Alaska United Drilling Inc., another joint venture, experienced reduced earnings due to lower rig utilization rates. NANA-Coates Diamond Drilling Inc. also incurred losses.

Subsidiaries Purcell Security Services Ltd. and Arctic Utilities, which owns and operates the electric plant and distribution system at Deadhorse, each showed increased profit in 1990. NANA Oilfield Services, which operates a camp, a petroleum products distributorship and an equipment rental service on the North Slope reported increased revenues but decreased profits due to tough competition that forced price cuts.

Also troubling NANA was its seafood division, which processes chum salmon, although cost control measures improved results from 1989. The Nullagvik Hotel in Kotzebue and Jade Mountain Products, which produces jade tiles and specialty items, also lost money in 1990.

For the future, NANA expects to increase both profitability and shareholder hire through development of the Red Dog Mine with partner Cominco Ltd. of Vancouver, B.C. NANA decreased long-term debt by $5.8 million and bought $2.6 million in property and equipment in 1990 to position itself for further growth.

SEALASKA CORP.

Sealaska Corp. of Juneau reported revenues of $128.4 million for the year ending March 31, 1991, an increase of 18 percent from $108.9 million the prior year. The performance marked the regional corporation's seventh straight profitable year, with earnings of $28 million compared with $16.8 million in 1989. A dividend of $23.57 per share was paid.

Although Sealaska earned $17.4 million on its timber operations, the firm is preparing for the end of its old-growth timber harvesting on ANCSA lands during the 1990s. In 1990, the company sold subsidiary Ocean Beauty Seafoods Inc. for $62 million. Also discontinued in 1990 was Alagco, a building products company. Sealaska expects to sell Fairbanks Sand and Gravel and Swacker Salmon Farms in Washington state.

The Southeast regional corporation posted record earnings of $13.2 million on its investments in 1990. Its natural minerals and resources group posted revenues of $6.3 million from sales of rock, sand and gravel; exploration lease revenues; and escrow revenues from the Department of the Interior. Sealaska also owns a 10 percent interest in the joint venture Alaska United Drilling Inc. and a dock company.

Timber sales are expected to continue in the near future. Sealaska put its timber business on a stronger footing by settling its Section 7(i) revenue-sharing differences with other regional corporations. The corporation also reduced general and administrative expenses by $2 million.

THIRTEENTH REGIONAL CORP.

The Thirteenth Regional Corp., representing Alaska Natives living outside the state, reported revenues of $756,704 for 1990, compared with $713,543 in 1989, a modest 6 percent increase. Headquartered in Vancouver, Wash., Thirteenth Regional does not have extensive land claims like the other regional corporations and does not have the financial resources for providing shareholder services.

The corporation holds a master franchise agreement with Mailboxes Etc. to operate mailbox and message services in regions of Washington and Oregon. It also owns real estate holdings in Cold Bay and Vancouver, Wash. In addition, Thirteenth Regional makes educational films and videos with emphasis on Alaska Native and Native American themes and salvages vintage World War II aircraft.

VILLAGE CORPORATIONS

KLUKWAN INC.

Klukwan Inc. of Juneau is the largest Native village corporation, due largely to its huge logging interests. The company's revenues fell 10 percent in 1990, from $107.1 million in 1989 to $96.7 million in 1990. Net income plummeted from $22.2 million in 1989 to $2 million in 1990, but Klukwan still paid a dividend of $360 per share to shareholders.

The principal reason for the decline in earnings was the poor performances of subsidiaries involved in timber harvesting and plywood manufacturing, caused by softening of world timber prices and reduced U.S. housing starts. Losses of $9 million were recorded at three logging operations.

Klukwan's subsidiary, Klukwan Forest Products Inc., is expected to conclude logging activities on Long Island and Hobart Bay in 1991. The village corporation is moving aggressively to diversify as its timber resources are depleted. KFP made its entry into non-logging operations with a road construction job on Prince of Wales Island in 1990.

Klukwan's plywood subsidiary, K Ply Inc., is concentrating on acquiring new lumber supplies in the Northwest, developing products and installing equipment to reduce costs and improve quality. A joint venture with the People's Republic of China, Klukwan Sino-US Forestry Ltd., had no operations in 1989 and 1990, and was essentially dissolved in 1990.

Recently activated subsidiary Chilkat Construction is bidding on road construction contracts, and Klukwan is looking for new ventures for North Pacific Expediting, which is already active in trading and transportation. KI Properties, a real estate holding company established in 1990, has acquired properties in Phoenix, Ariz.

UKPEAGVIK INUPIAT CORP.

In 1990, for the first time, every subsidiary of Ukpeagvik Inupiat Corp. of Barrow posted profits. The Native village corporation showed total revenues of $47.1 million for the period ending June 30, 1991, a 46 percent increase from $32.3 million the prior year.

Land development and support services are UIC's primary businesses. Wholly owned subsidiary UIC Construction, a general contractor, contributed the most revenues, with $22.6 million. Joint ventures Piquniq Management Corp., which operates and maintains government facilities, Piquniq Service Corp., which provides offshore personnel, and UICC/SKW Eskimos Construction also posted large increases. In addition, UIC focused on shareholder employment, with 80 percent of parent company employees and 60 percent overall being shareholders.

UIC remains optimistic about the future. The company has virtually no debt, and expenses were kept down in 1990. Piquniq Management recently received contracts for operation and maintenance for the Coast Guard base on Kodiak Island and for parts support for the U.S. Navy long-range transport vessels. UIC expects to provide support services for offshore exploration by Arco and Chevron, as well as for North Slope Borough gas-field development.

ANCSA Celebration

To mark the 20th anniversary of the passage of the Alaska Native Claims Settlement Act, the Alaska State Chamber of Commerce is hosting a dinner, reception and multimedia program on Friday, Nov. 15, at the Anchorage Sheraton Hotel. The event celebrates the founding of the Native corporations and will focus on their economic impact, recent accomplishments and future economic opportunities. For information, call Kathy Tarr, 278-2722.
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Title Annotation:includes related article; Akaska Native Claims Settlement Act native regional and larger village corporations
Author:Gerhart, Clifford
Publication:Alaska Business Monthly
Article Type:Industry Overview
Date:Nov 1, 1991
Words:4166
Previous Article:Alaska's fishing charters come of age.
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