Alaska native regional corporation 2017 review: corporations plow through recession with continued shareholder, community support.

• Author: Stricker, Julie
• Position: Alaska Native Business

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.

The regional corporations were tasked with dual economic and social mandates. They set up for-profit enterprises, which today operate subsidiaries around the globe and employ tens of thousands of people. They also spend millions of dollars each year to support shareholders through educational opportunities, scholarships, internships, elder benefits, and programs to maintain their cultures, languages, and heritage.

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 through resource development, 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.

Ahtna, Inc.

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.

Ahtna is working with a company, Finite Carbon, to take advantage of its extensive timber holdings by leaving the trees standing. The corporation discovered it has more than eight million tons of carbon stored on a half-million acres, which can be used in a carbon offsetting program that will sell credits to companies such as utilities and refineries to offset the carbon they release into the air. It is Ahtna's largest project to date.

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 Matthew Fagnani in a message to shareholders. The results "significantly exceeded the financial plan for the year and exceeded market performance for companies in similar lines of business," Fagnani says.

Operating companies provide 69 percent of Aleut's revenues, while the remaining 31 percent comes from 7(i) funds. In 2016, Aleut received...