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Weekly UpdatesBusiness is booming for Alaska's 13 Native regional corporations, thanks to increases in oil and metal prices, growth in the government and commercial contracting sector, and strong returns realized in investment portfolios.
Cumulatively, these corporations surpassed the $5 billion mark in total revenues reported in the fiscal year 2006, with a total of $5.156 billion in total revenues reported from 12 of the 13 corporations. Audited figures for Seattle-based The 13th Corp. for 2006 were not available at press time.
Even without the 13th's figures for 2006, the $1.1 billion increase reported from other corporations is almost a 30 percent increase in revenue from 2005, a phenomenal growth rate in just a year's time. All 12 corporations providing annual report information reported increased revenues in 2006, most with double-digit growth.
Net profits also increased substantially for Alaska's regional corporation, with $488.5 million reported for 2006, compared to slightly more than $250 million in 2005. A portion of those profits are distributed to shareholders in the form of dividends, ranging in size from $1.18 per share paid to Koniag shareholders to the $47.41 per share paid to shareholders of the Arctic Slope Regional Corp.
Several regional corporations experienced substantial revenue growth through work in the federal government-contracting arena through Section 8(a) of the U.S. Small Business Act, which gives special consideration to small and minority-owned businesses when bidding on federal contracts.
Lucrative, due to the sheer volume and geographical spread of business opportunities available, such governmental contracting work typically is a low margin venture. "Net profits after taxes, the 4 percent to 5 percent range is considered pretty good ... the government is always looking for the best value for taxpayers," said Barney Uhart, president and chief executive officer at Chugach Alaska Corp., which received the bulk of its $890 million in revenues in 2006 from contracting work. "If you have a lot more volume, you can make more money."
More than half of the $805 million in revenues in 2006 at NANA came from contracted government services. "It is low-margin work. You have to handle a lot of transactions to have much net income," said Helvi Sandvik, president of NANA Development Corp.
Most of the business expense in government contracts goes to the wages paid to employees who are delivering the services, she said. "Folks jump to the conclusion that we're not realizing huge returns," Sandvik said. "But with greater volume, we can make a greater contribution to the bottom line."
With increased scrutiny of the program, several of Alaska's regional corporations told shareholders in 2006 that they were working to protect the SBA program, while looking for other arenas in which to utilize these contracting skills.
Calista Corp., which received in 2006 more than half of its revenues from contracting work, "... expects to face increase competition in the contracting area and increased proposal costs as potential adverse changes ... make the challenges of obtaining contracts more difficult."
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AHTNA INC.
Headquartered in Glennallen, Ahtna Inc. reported a 15 percent increase in revenues in 2006, compared to the prior year. Total revenues grew from $95 million in 2005 to $110 million in 2006.
Profits also grew in 2006, increasing from $652,000 in 2005 to $1.06 million in 2006. "In 2006, we successfully executed a number of key initiatives to lay a foundation for continued growth," said Ken Johns, president and chief executive officer, in the corporation's annual report.
Ahtna added several new subsidiaries, including AhtnaSTS LLC, which represents support and training services, the primary focus of the new company. Another new subsidiary is Koht'aene Enterprises Co., a certified 8(a) company focused on construction, remodeling and building renovation.
"The possible reduction in future government-contracting opportunities for our subsidiaries is being addressed internally by an aggressive pursuit of non-government-contracting opportunities and strict management of existing government contracts," Johns said.
Exploration for gas on corporation land continued in 2006 and into 2007 by lessee Rutter & Wilbanks.
THE ALEUT CORP.
Representing Alaska Natives originating from the Aleutian Island chain in Southwest Alaska, the Aleut Corp. reported an increase in revenues in 2006. Total revenues grew to $119.5 million in 2006, up from $96 million in 2005.
Net income declined slightly in 2006 to $15.7 million, down from $16.2 million in 2005 due to the corporation reporting a smaller income tax benefit, according to the 2006 board chairwoman Debra Mack.
Shareholders of The Aleut Corp. received dividends of $4.60 per share, she noted, along with an elder dividend of $500.
"All primary business areas of the company show improved operating results for the year just completed," she said, in the 2006 annual report. The company is well-positioned and committed to growth in the future, both in our defense and non-defense related subsidiaries.
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ARCTIC SLOPE REGIONAL CORP.
By far the largest of Alaska's Native regional corporations in terms of revenue and employment, Arctic Slope Regional Corp. reported a record-setting year in 2006.
Total revenues were $1.7 billion, an increase of nearly 9 percent over the prior year. Net income jumped substantially to $206.2 million, up from $127 million in 2005, allowing the corporation to double its dividend payments to shareholders.
"We ended 2006 in the strongest position we've ever been in before," said Kristin Mellinger, executive vice president and chief financial officer for ASRC.
Commodity prices, primarily for crude oil, contributed to ASRC's growth in 2006, she said.
According to the Alaska Native Claims Settlement Act, the initial government action that granted Alaska Natives land and money to form these regional corporate entities, 70 percent of revenue derived from natural resource development is shared among the regional corporations.
ASRC received in 2006 about $152 million in royalty payments from the Alpine oil field on Alaska's North Slope. Of that, ASRC distributed $101 million to other Alaska Native corporations and kept about $50 million, Mellinger said.
Profits for the corporation also grew in 2006 as a result of improved operational performance. Several years ago, ASRC began to focus internally on the numerous different business lines housed under the corporate banner. "We looked at how much we were spending on infrastructure to support those operations," Mellinger said. "In 2005 and 2006, we began to see the results of clearly defining our core operations and focusing on the few things that we do really well."
ASRC also centralized services that were common among all of its business units and combined similar businesses under one manager. "Once we narrow our focus, we take what we have and grow it in terms of revenue and in terms of profits."
Operational revenues to ASRC in 2006 were divided among four sectors, with each providing roughly one-quarter of the corporation's annual revenues, Mellinger said. Those include federal government contracting, primarily operating in the Lower 48; ASRC's energy sector services with clients on the North Slope, in Canada and the Gulf of Mexico; refinery operations in North Pole and Valdez and construction contracting work, primarily in remote regions of Alaska.
Unlike other Alaska Native corporations, ASRC's experience in the governmental contracting arena has yielded work that Mellinger said was not necessarily "high margin," but would not accurately be described as low margin, either.
"Our government contracting is primarily technical ... our people are scientists and researchers, so it's a little bit narrower focus than for perhaps base operations," she said.
BERING STRAITS NATIVE CORP.
Headquartered in Nome, the Bering Straits Native Corp. continued steady growth in 2006, with revenues growing to $42.6 million, up from $21.6 million in 2005. Profits also grew in 2006 to $4.5 million, up from $1 million in 2005.
"The major difference is the government-contracting work in the last three to four years providing a steady increase in earnings," said Tim Towarak, president and chief executive officer for Bering Straits.
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Those corporate subsidiaries all produced positive net income for the year, including good returns from 8(a) federal contracting activities.
Bering Straits and the region's general economy is benefiting from development of the Rock Creek gold mine, an open-pit hard rock mine being built by NovaGold Resources just a few miles outside of Nome. Part of the mine is located on corporation land, allowed under an agreement with the mining company that contains future development provisions, Towarak said.
Increased activity in town helps fill rooms in hotels owned by Bering Straits, as well as filling commercial and residential rental property. The mining and construction crews have "taken over one hotel and have a number of rooms at another," Towarak said.
Bering Straits received about $3.7 million in resource revenues from other Alaska Native corporations in 2006.
BRISTOL BAY REGIONAL CORP.
Bristol Bay Regional Corp. posted another year of substantial revenue growth, reporting $762.4 million in revenues in 2006, growing 137 percent from 2005's $321 million. Net income also increased, growing from $8.3 million in 2005 to $21.2 million in 2006.
"The increased revenue is primarily traced to the sale of diesel from our subsidiary in the Pacific Northwest," said Tom Hawkins, senior vice president and chief operating officer at Bristol Bay.
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