Alaska Native Regional Corporation 2017 Review
By Julie Stricker
PHOTO BY CHRIS AREND, COURTESY OF NANA REGIONAL CORPORATION
Melvin (“Joe”) Cook, a NANA shareholder and electrician at Red Dog Mine.
Since their creation more than forty-five years ago, Alaska Native regional corporations have become a remarkable economic engine in Alaska. Together, they account for billions of dollars in revenue and employ thousands of Alaskans. Despite a stubborn statewide recession amid low oil prices, the diversity of these twelve corporations keeps them strong and profitable.
The Alaska Native Claims Settlement Act was passed in 1971 to settle indigenous land claims and open the way for the trans-Alaska oil pipeline. Through ANCSA, Alaska Natives received 44 million acres of land and $962.5 million, after which they set up twelve regional corporations to receive and distribute those entitlements. A thirteenth corporation also was set up for Alaska Natives outside the state, however, it did not receive a land grant and is currently inactive.
One ANCSA clause, 7(i), acknowledges that some regions are richer in natural resources than others and requires corporations to share a portion of revenues created by developing the resources, such as minerals, oil, and timber. After certain deductions, the corporation can keep 30 percent of the resource revenues and distribute the remaining 70 percent to the twelve Alaska-based regional corporations (including itself) Therefore, low oil and commodity prices in 2016 affected all of the regional corporations, resulting in millions of dollars less distributed through 7(i) sharing, a drop of nearly 40 percent from 2015.
As in years past, government contracting subsidiaries set up under the Small Business Administration’s 8(a) program provided the bulk of revenues for many of the corporations, despite increasing competition for contracts and tighter regulations.
Despite the recession in Alaska and a general downturn in government contracting, Glennallen-based Ahtna, Inc. had a strong year in 2016 with overall revenues of about $218 million, a 16 percent increase compared to 2015.
The majority of Ahtna’s income is derived from service contracts in both the federal and commercial arenas. It divides its businesses into four segments: government and technical contract services; construction and pipeline services; resource development; and real estate.
Ahtna successfully spudded the exploratory Tolsona No. 1 oil and gas well eleven miles west of Glennallen in 2016. It has not announced any results to date, but is conducting additional work at the mile-deep well bore and is interested in additional exploration. In 2016, Ahtna purchased AAA Valley Gravel in Palmer. The corporation is also looking at developing a resort complex near Denali National Park.
In recent years, Ahtna has taken a strong stance toward protecting its land and natural resources for the benefit of its 1,900 shareholders.
In November 2016, the Ahtna Intertribal Resource Commission, a nonprofit not directly associated with the corporation, signed a cooperative wildlife management agreement with the US Department of the Interior that oversees moose and caribou on federal land in the Ahtna region, giving Ahtna tribal members a greater role managing wildlife.
Its 2016 dividend of $5.75 per share is the highest in a decade. Also in 2016, Ahtna distributed $12.9 million in total shareholder benefits, including $8.4 million in wages and benefits, $1.5 million in dividends, $539,000 for its settlement trust, and $2.5 million in other contributions such as memorial support, shareholder development, community support, scholarships, and cultural and traditional uses of Ahtna lands.
The Aleut Corporation
The Aleut Corporation boosted its government contracting business by 44 percent in 2016, giving the corporation a net profit after a loss in 2015. President Thomas Mack calls 2016 “a great year for progress and financial improvement.”
The corporation has subsidiaries in government contracting; fuel delivery, sales, and storage; commercial and residential real estate; gravel; instrumentation and controls sales; mechanical contracting; and oil field industrial services. Total revenues from all sectors rose to $171.66 million, with a net income of $3.03 million. Shareholders received a $4 per share dividend.
The corporation put together a four-pronged approach to reverse its 2015 losses, says CEO Operating companies provide 69 percent of Aleut’s revenues, while the remaining 31 percent comes from 7(i) funds. In 2016, Aleut received $3.41 million from 7(i), a 41 percent decrease from 2015.
Aleut donated more than $1.05 million to charitable and not-for-profit groups that benefit its 3,900 shareholders, including $900,000 to The Aleut Foundation. It also funds seven cultural camps, five in Aleutian communities, one in Anchorage, and one in the Pacific Northwest.
Arctic Slope Regional Corporation
Arctic Slope Regional Corporation (ASRC) continued to diversify its portfolio in various markets in 2016. The Barrow-based corporation is the largest Alaska-owned corporation, with holdings in four major categories: petroleum refining and marketing; government technical services; energy services; and construction. It had $2.37 billion in revenues in fiscal year 2016, down from $2.52 billion in 2015.
ASRC recently joined the Arctic Economic Council as its first Northern Partner, allowing the corporation to take part in discussions relating to responsible economic development and business activity in the circumpolar Arctic.
ASRC’s 13,000 Iñupiaq shareholders benefit from employment, education, and training opportunities, including internships, student camps, technical certifications, educational workshops, and leadership training. These offerings span across the North Slope villages, the state of Alaska, and the Lower 48. ASRC has distributed an average of $16 million each year in benefits to its shareholders in the form of scholarships and community supporting funding, as well as training and development.
Bering Straits Native Corporation
Last year was one for the records for Bering Straits Native Corporation (BSNC), largely on the strength of its government service contracting subsidiaries, according to President and CEO Gail Schubert. In 2016, overall revenues increased to $326 million, $243 million of which was generated through contracting. BSNC’s net income was $14 million.
However, the percentage of revenue coming from contracting, which at one time was more than 90 percent of BSNC’s income, has been dropping as the Nome-based corporation diversifies its holdings. In 2016, it bought the retail chain Alaska Industrial Hardware.
Looking toward the future and a warmer Arctic, BSNC sought conveyance of land at Point Spencer/Port Clarence, a deep-water port northwest of Nome, as part of its ANCSA land claim. BSNC paid out $2.5 million to its 7,500 shareholders, which included a special $500 elders’ dividend. It also awarded $212,700 to shareholders and descendants for post-secondary education and maintains a paid summer internship program.
Bristol Bay Native Corporation
The end of fiscal year 2016 capped a five-year strategic planning cycle that saw tremendous growth for Bristol Bay Native Corporation (BBNC). BBNC has operations in construction, government services, industrial services, and tourism with 2016 revenues totaling $1.51 billion, down from 2015’s $1.74 billion. It paid out $17.5 million in dividends to its 10,350 shareholders. While operating companies grew in 2016, the corporation saw a loss in its investment portfolio. BBNC continues to look for strategic acquisitions in several sectors.
According to its annual report, BBNC’s largest subsidiary in its industrial services line is Peak Oilfield Service Company. Peak and BBNC’s other industrial service companies operate primarily in Alaska and have been affected by low oil prices and uncertainty in the oil and gas industry. The outlook for 2017 in this sector was cloudy.
BBNC plans to increase the benefits afforded by 8(a) contracting and is implementing an initiative that includes establishing joint ventures and mentor/protégé arrangements between its government contracting subsidiaries and village corporations and tribes within its region.
Over the past few years, BBNC also has focused on creating opportunities for shareholders within its region, which centers on Bristol Bay in southwest Alaska. The Bristol Bay Development Fund invests in businesses such as hydroponic gardening in Dillingham and a reindeer-herding project in Port Heiden.
When ANCSA was passed, only Alaska Natives born before December 18, 1971, were allowed to become shareholders. In 1991, an amendment to ANCSA allowed the corporations to enroll those born after the deadline. Five corporations—Doyon, Sealaska, ASRC, NANA, and Ahtna—voted to enroll descendants. In 2015, Calista shareholders did so as well, opening enrollment in January, according to Calista Communications Manager Thom Leonard. The move is expected to triple the number of Calista shareholders from 13,000 to 43,000.
In July, Leonard says, 13,500 applications have been submitted, half of which are from people eighteen to forty-four years old. The youngest was born May 2017. Nearly three-fourths of the applicants live in the Calista region in southwest Alaska.
As its shareholder base expands, the corporation continues to thrive. Calista has operations in defense contracting; construction; heavy equipment sales, rental, and service; real estate; environmental services; marine transportation; oil field services; and fiber optic services.
Total revenues grew to $492 million in 2016, up from $460 million in 2015. Calista closed two subsidiaries, Solstice Advertising and Futaris, Inc. “Calista also continued our efforts to expand geographically by searching for opportunities in the Lower 48, including our construction and real estate operations,” Leonard says. Subsidiary Tunista Construction earned a safety excellence award from Associated General Contractors of Washington.
Since its scholarship program began in 1994, Calista nonprofit Calista Education and Culture (CEC) has awarded $4.2 million in scholarships, with more than half of that being awarded since 2010.
With support from the Alaska Humanities Forum, CEC hosts a culture camp each year for youth that includes inviting new teachers in the Calista region to learn about its Yup’ik, Cup’ik, and Athabascan cultures. A local elder couple in the teacher’s community essentially adopts the teacher, introducing them to families and taking them to community events and answering questions about culture, Leonard says. The goal is to reduce turnover rates.
Since 2014, Calista has paid dividends twice annually. The spring dividend is based on operations, while the fall dividend is from its Akilista investment portfolio. In 2016, Chugach Alaska distributed $8.57 million in dividends, bringing total dividends to $52.1 million since Calista’s inception. Calista elders have received an additional $5 million in dividends since 2008.
Chugach Alaska Corporation
Chugach Alaska Corporation had a “transformational year” in 2016, with all of its business lines delivering strong financial results. Overall revenues totaled $842.4 million with $32.9 million in net income.
The corporation, which has a land base in Prince William Sound, is building a more powerful, diversified portfolio. It has leveraged its long history of facilities management and maintenance work for federal government contracting customers and is applying its expertise to the commercial facilities service and energy services sectors. In doing so, Chugach more than doubled the percent of gross profit from commercial businesses and investments from 8 percent to 18 percent.
In October, Chugach completed its largest acquisition to date, purchasing Chicago-based facilities services provider Rex Electric & Technologies. It also completed permit applications and an environmental analysis related to constructing a commercial hard rock quarry in Port Gravina.
Chugach sold its coal rights within the Bering River Coal Field to New Forests, a sustainable forestry and conservation investment manager. New Forests retired the rights by transferring them to The Nature Conservancy and the local Native Conservancy land trust. The sale allows Chugach to provide financial benefits to shareholders including its Chugach Heritage Foundation (CHF) Endowment and Settlement Trust.
In 2016, Chugach returned $11.5 million in shareholder programs and benefits, including $9 million in shareholder and elder dividends. It’s the seventeenth consecutive year Chugach has distributed dividends, a total of $120.5 million. Chugach has 2,600 shareholders. CHF awarded $760,000 in scholarships. Chugach also contributed $2.6 million to the CHF endowment in 2016, bringing the balance to $6.3 million, and pledged an additional $24 million in future contributions to CHF.
Cook Inlet Region, Inc.
Low oil prices hit some sectors of Cook Inlet Region, Inc.’s (CIRI) business hard in 2016. The Anchorage-based corporation owns 7 percent of Cruz Energy Services, which moves oil rigs in North Dakota’s Bakken oilfield. When CIRI acquired its interest in the company in 2012, Cruz had 205 oil rigs in Bakken. Today there are only 34. As a result, CIRI’s revenues in the oilfield and construction services sector are less than half of what they were three years ago, President and CEO Sophie Minich said in a message to shareholders.
More than 80 percent of CIRI’s resource development revenue comes from natural gas production, which declined 38 percent in 2016.
Despite the challenges, and due in part to the diversity of its operations, CIRI’s total overall revenue grew to $289 million in 2016, with a net income of $9.1 million.
However, other sectors are performing well and CIRI is continuing to add to its energy portfolio. Its North Wind Group is expanding to new geographic regions and secured large, multi-year contracts with the US Department of Energy. It also acquired long-time competitor Portage, Inc.
CIRI is a major investor in the Middletown Energy Center, a large natural gas-fired power plant in Ohio that will replace aging coal plants in the region. It is scheduled to go into operation in 2018. In Anchorage, CIRI’s Fire Island Wind reported record output in 2016. Fire Island Wind and CIRI’s other wind energy investments—Capistrano Wind Partners, Palouse Wind, and Briscoe Wind—boosted the corporation’s finances.
Low oil prices plagued Fairbanks-based Doyon in 2016, dropping its operating income below 2015 levels. However, the company still marked its second-highest income in its forty-five-year history, marked by success in other operations, such as Doyon Utilities.
Overall, Doyon recorded $305.41 million in revenues, with a net profit of $51.59 million, just below 2015’s record. That’s in large part to the diverse family of companies Doyon runs, with operations in oil field services, government contracting, land and natural resource development, utility management, security, engineering, facility management, construction, and tourism.
The corporation paid more than $33 million in shareholder wages in 2016, as well as a $5.99 per share dividend to more than 19,000 shareholders. It was the 30th consecutive dividend for the corporation.
Subsidiary Doyon Drilling added a new state-of-the art rig to its fleet in 2016. Rig 142 is designed to operate in Alaska’s extreme arctic conditions and is under contract to ConocoPhillips for five years.
Doyon is continuing its oil and gas exploration efforts in the Nenana/Minto Flats Basin. A well drilled in summer 2016 did not show commercial quantities of oil and gas but confirmed the presence of an active petroleum system. The company is planning a 3D seismic survey in the northern part of the basin for winter 2017.
For the third consecutive year, Koniag, Inc. showed an increase in net earnings in fiscal year 2016, amidst a reduction in corporate and general expenses. The Kodiak-based corporation, with 3,850 shareholders, saw steady growth from its operating companies. “These trends paint a picture of Koniag ‘doing more with less,’ which we have found is achievable with focus and efficiency,” CEO Dr. Elizabeth Perry said in a letter to Koniag shareholders.
Koniag had $252 million in revenue in 2016 and $7.67 million in net earnings. While gross revenues were slightly below 2015 levels, they still exceeded 2014 revenues by 31 percent. About 89 percent of Koniag’s operating revenues come from professional services subsidiaries, which include companies working in information technology services and government services.
Due to its continued earnings improvement, Koniag shareholders received a $5 per share dividend. Koniag also contributed $374,000 to the Koniag Education Foundation, as well as donations to Alaska Native organizations such as the Alutiiq Museum and Archaeological Repository, Alaska Native Heritage Center, and Dig Afognak. Koniag also developed an advocacy plan that outlines critical support and services that will improve the lives of its shareholders, such as access to the Alaska Marine Highway System and subsistence resources.
NANA Regional Corporation
NANA Regional Corporation settled into operations under President and CEO Wayne Westlake, who took the helm of the Kotzebue-based corporation in February 2015. NANA has operations in fifty states, fifteen countries, and four continents in its core areas of resource development/mining; federal and commercial contracts; and oil and gas support.
In 2016, NANA posted revenues of $1.3 billion. NANA was able to partially offset the downturn in oil and gas due to ten-year highs for the price of zinc at its Red Dog Mine. NANA paid shareholders, partners, and affiliates, many of whom work at Red Dog, $64 million in wages in 2016. “We are happy with the upswing, recognizing that metals are a cyclic commodity and one needs to plan for the ups and downs,” says Amy Hastings, senior director for corporate communications.
The downturn in the oil and gas industry has affected every Alaska business, she says. “Our clients in the industry have been with NANA for over thirty years, and we will continue to support them fully. We are confident that this market swing will trend up again.”
In the eastern part of the NANA region, Trilogy Metals partnered with South32 to start a $17 million field season in the Ambler mining district known as the Upper Kobuk Mineral Project.
NANA also supports social and cultural programs, contributing about $2.9 million in 2016. It also supports the Aqqaluk Trust, contributing $1 million in 2016. The trust awarded 326 scholarships for a total of $752,483 in 2016.
Sealaska’s strategic focus has been to grow its business income since a major reorganization in 2012. Its efforts are paying off, with a $15.2 million increase over the last four years. The Juneau-based corporation has operations in natural resources, government services, and natural foods. It is focusing on relevant businesses close to Southeast Alaska and the Pacific Northwest such as remote project management, environmental monitoring, data analytics, and natural foods that include a platform of opportunity for Sealaska shareholders.
In 2016, the corporation saw total revenues of $145.51 million, with net income of $14.033 million.
As part of its 2012 strategic plan, Sealaska bought a minority interest in Independent Packers Corporation, a custom seafood processor in Seattle. Its goal is to “develop and market products in a way that builds on the unique culture, knowledge, and heritage as Tlingit, Haida, and Tsimshian people.”
While timber has long formed a key role in Sealaska’s business model, carbon sequestration offers another way to benefit from one of Southeast Alaska’s most abundant resources. In 2016, Sealaska created a 155,000 acre carbon bank from which the corporation will earn carbon credits that it can sell to carbon-emitting companies to mitigate or defer global warming.
In 2013, Sealaska created the nonprofit Spruce Root, Inc. to provide financial and technical assistance to shareholders. It invested nearly $1 million in loans to eight businesses in four communities.
Sealaska also contributed $1.6 million in cash and in-kind services in support of the Sealaska Heritage Institute. It also contributed $539,500 toward scholarships.
JULIE STRICKER IS A JOURNALIST LIVING NEAR FAIRBANKS
The full version of this article appears in the September 2017 print edition of Alaska Business.