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Weekly UpdatesWhether calculating operating revenues, work opportunities or social-economic impacts such as education scholarships, cultural programs or dividend payments, Alaska Native corporations are becoming financial powerhouses in the Last Frontier's economy.
In 2004, the 13 corporations generated $3.4 billion. Ten of the corporations posted profits, with Chugach Alaska Corp. providing the largest net income of $37.5 million to its shareholders. All except Sealaska reported revenue increases in 2004.
"We all know that their influence, their employment and their effect on the economy has been growing pretty dramatically over the last 10 to 15 years," said Neal Fried, an economist with the state Department of Labor.
Trying to track the Native corporations' portion of Alaska's job market is next to impossible, he said. "Most of the employment is not with the regional corporations but with subsidiaries and joint ventures."
Diversified business operations has been a mantra for many Native corporations. Investments range from traditional natural resource development to financial management entities, to research and development of high-tech industry.
Unlike many of the other large business entities doing business in Alaska, Native corporation revenues return to headquarters in the Last Frontier. Any profits or dividend payments go mostly to Alaska residents.
"More and more of the Native corporations are doing business outside of the state and bringing the profits back to Alaska, which is opposite of the normal business model here," Fried said.
For example, of the $700 million in revenues earned by Chugach Alaska Corp. in 2004, only 18 percent-$126 million-came from work completed in Alaska, according to President Barney Uhart.
ARCTIC SLOPE REGIONAL CORP.
By far the largest of the 13 regional corporation in terms of revenues and number of employees in its subsidiaries, Arctic Slope Regional Corp. found itself in an unusual position in 2004. The company earned more than $1.3 billion in total revenues, but posted a $17 million loss for the year, thanks mostly to a federal ruling regarding ASRC's petroleum refining and marketing division in Alaska. (See sidebar story).
That $37 million quality bank judgment came the same year as ASRC recorded an $8.6 million non-cash impairment charge in the company's Omega Natchiq division operating in the Gulf of Mexico and an $8.5 million negative charge as a result of litigation against Puget Plastics Corp, a business that has been discontinued.
Without those three financial hits, ASRC "would have been profitable in 2004," said Kristin Mellinger, chief financial officer.
She points to the corporation's growing numbers in Earnings before Interest and Taxes as a more accurate measure of operating performance. In 2004, ASRC posted $38 million, compared to $13 million the year prior.
Neverless, the company has continued to post thin margins for the amount of revenues, even without impacts from taxes, interest and the quality bank judgment. That is a trend ASRC management is striving to change, she said. "We understand it's unacceptable to have large revenues and low earnings," Mellinger said. "We've been telling the shareholders for several years that we're on our way."
Early results from the 2005 fiscal year prove the tide is turning, she said, with net income estimated to be more than $59 million for just the first six months. ASRC will post more revenue and profits in 2005, "more than any other year in the history of the corporation," she added.
AHTNA INC.
Similar to ASRC but on a smaller scale, Ahtna's bottom line suffered from a one-time financial hit due to court action. The corporation paid $9.5 million in 2004 to settle a court case involving a construction project completed by a subsidiary. "Previous management got us into a bad project in San Francisco," said Ken Johns, president and CEO of Ahtna. "It was a mistake.... I'm very confident we will be able to weather some storms and do quite well."
Without that settlement figure, Ahtna would have posted $2 million in net income in 2004, about the same as the prior year, although revenues increased nearly 20 percent in 2004 to $83.8 million. The settlement loss dropped Ahtna's bottom line to a $7.5 million net loss.
Johns is looking forward, describing a halt to the corporation's downward spiral in a letter to shareholders. "The profits that we have made have been used to pay down debt and to invest for future growth, which will increase our profits in the years to come," he said.
Contract bidding is now more focused on jobs that "best fit our company," he said. "We're being very conservative to make sure we do quality work on contracts. Our name is very important to us."
In addition to contract work, Ahtna is involved with a wildcat gas well drilled this year on Native lands about 10 miles southwest of Glennallen, headquarters for the corporation. At press time, participants were waiting results of that drilling to determine the next step, Johns said.
BERING STRAITS NATIVE CORP.
Also suffering growing pains in the 8(a)-contracting arena during 2004 was the Bering Straits Native Corp., although the Nome-based organization made strides to identify and overcome deficiencies in operations, according to Tim Towarrak, president.
"We absorbed a huge loss from one of our subsidiaries involved in a project in North Carolina," he said.
Since then, two retired military personnel familiar and experienced with the federal contracting process have been hired by the corporation. An Anchorage marketing office was also opened, giving the corporation a "better handle on our 8(a) operations," Towarrak said. "We made a lot of mistakes due to a lack of business understanding, but we've hired some very good people.... I'm very optimistic."
Bering Straits and its subsidiaries earned $16.4 million in revenues in 2004, posting a net loss of $373,000, an improvement over the $2.9 million loss in 2003.
Other factors helping the move include a strengthening gold price, driving up interest in the corporation's lands and subsurface mineral rights. The Rock Creek gold project being developed by NovaGold is located on Native lands, Towarrak said. "We're encouraged by the progress they're making on the property."
Bering Straits also expanded its hotel property in Nome, adding 33 rooms. "It was the right thing to do because we've had a very high occupancy rate," Towarrak said. "Nome was ready for a good hotel. It's been a good investment for us."
BRISTOL BAY NATIVE CORP.
Posting a dramatic turn-around in 2004 was the Bristol Bay Native Corp., which grew its total revenues by almost 40 percent, to $259.8 million. The boost in revenues helped the corporation earn a $22.7 million profit in 2004, a significant improvement over the $9.6 million net loss the prior year.
"We were a little bit weaker in one subsidiary that tried to expand to the Lower 48," said Tom Hawkins, senior vice president and chief operating officer. "They've recovered their footing and are on track now."
Bristol Bay's largest growth came from its Petrocard subsidiary, a network of self-fueling stations in the Pacific Northwest. Despite the same average per gallon margin of 14 cents in both 2003 and 2004, sales volume increased in 2004. Additionally, the chain gained some notoriety in the Seattle area, offering the environmentally friendly biodiesel fuel.
Bristol Bay also started construction in 2004 of a new 68,000-square-foot office building in Anchorage, scheduled to be open late this summer, Hawkins said. Designed to house all of the corporation's entities in one location, the move was both a logistical and investment decision. "We wanted to invest in Alaska real estate," he said.
Natural resource opportunities loom in the future for Bristol Bay and its shareholders. A large gold-copper-molybdenum deposit called Pebble is being developed in the Lake Iliamna region, and the state of Alaska has scheduled an on-shore oil and gas lease sale in October for the Bristol Bay region. "We don't know exactly how much of industry will come calling out to Bristol Bay," Hawkins said. "People are interested in how the process works."
CALISTA CORP.
A stable, steadfast organization that posted its 11th year of profits, Calista Corp. saw both revenues and net income increase in 2004. With almost $50 million in revenues, the corporation reported just more than $2 million in net income for the year.
"The biggest contributor is our government contracting," said Dixie Retherford, executive vice president and chief financial officer, of a sector that grew 10.5 percent.
Calista operates two subsidiaries that hold 8(a) certificates, providing special consideration in federal contract bidding. Both secured or maintained ongoing, multiple year contracts pouring millions of revenue into the Native corporation. "It's been a good venture for us," she said.
A gold resource located on Calista land, the Donlin Creek project being developed by Placer Dome and NovaGold Resources, provided an increase in business for Calista's camp services and catering subsidiary. Work continues to pick up for that subsidiary in 2005, as that project advances and as Calista has optioned another mineral resource at Nyac to Tonogold Resources.
"One of the real benefits they bring to us is jobs for shareholders," Retherford said, noting that shareholder-hire for camp services at Donlin Creek exceeded 85 percent.
Calista also purchased a small, Anchorage-based catering company in 2004. Mayflower Catering provides "in-town kitchen facilities to use to support some of our camp facilities," Retherford said.
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