ANCSA corporations: how they fared in 1989.

• Author: Jones, Arlitia
• Position: Alaska Native Claims Settlement Act - Cover Story

ANCSA Corporations

Last year was a year of adaptation for the state's 13 Native regional corporations and for larger Native village corporations. When the Exxon Valdez leaked almost 11 million gallons of oil into Prince William Sound, corporations that ordinarily relied on the seafood industry to generate the majority of their revenues found diversification crucial to ensure economic survival.

Because of losses suffered in the seafood industry, Sealaska Corp. in 1989 made the decision to sell Ocean Beauty Seafoods Inc., formerly its largest revenue-producing subsidiary. Chugach Alaska Corp., although it too suffered heavy losses from its seafood operations, was able to report a profit by providing support services during the cleanup effort that followed the March 24, 1989, oil spill.

Also offsetting cannery losses were earnings gained in a strong timber market. Both Chugach Alaska and Sealaska profited from increased demand and higher timber prices, as did Klukwan Inc.

Development of natural resource assets continues to be a common Native corporation priority. Efforts are focused on oil and gas exploration and development as well as on quantifying and producing from mineral deposits on lands conveyed by the 1971 Alaska Native Claims Settlement Act (ANCSA).

Among those developing natural resource assets are Cook Inlet Region, with its Kenai Peninsula oil reserves and coal reserves in the Wishbone Hill area, and NANA Regional Corp., with production at its Red Dog Mine, now in the startup phase. Other firms still are inventorying such assets or looking to acquire them. Koniag Inc., for example, is seeking to gain oil and gas development rights in the Arctic National Wildlife Refuge through a land exchange.

For many ANCSA corporations, comparisons of 1988's and 1989's financial reports reflect the loss of tax benefits from sales of net operating losses (NOLs) that were permitted by Congress in the Tax Reform Act of 1986. In such transactions, many profit-making Lower 48 firms bought the losses to lower their tax bills and shared the tax savings with the Native Corporations. SAles of NOLs enabled many struggling regional and village firms to increase cash holdings and achieve profitability. Except for a few special-case extensions, Congress halted the NOL sales in 1988.

Following are brief financial profiles of the state's 13 Native regional corporations and 2 of the largest village corporations. Because fiscal years varied widely, research for this report used the fiscal year that reflects the most months in calendar year 1989. 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. of glennallen experienced a roller-coaster year for earnings in 1989. After record net earnings of $4.1 million realized by the sale of NOL tax benefits in 1988, the corporation tallied only $163,858 in 1989 net earnings. As a result, dividends paid to shareholders declined from $22.64 in 1988 to $.92 in 1989.

Extraordinary income items such as NOLs are a thing of the past, and the corporation was forced to rely on the income from its operations. Ahtna's total operating revenues for 1989 were $7.9 million, up 22 percent from $6.5 million in 1988. A construction subsidiary, Ahtna Enterprises Corp., completed construction of the Riley Creek Visitors Access Center in Denali National Park under a $3.4 million contract, but suffered losses overall.

Alaska Security Inc., a commercial security subsidiary, also operated at a loss for its second consecutive year. A new contract with Carrs Quality Centers is expected to help the subsidiary turn the corner toward profitability.

On a more successful note, the joint venture H.C. Price Construction received a 15-year contract for total maintenance of the trans-Alaska pipeline. In addition, the subsidiary Ahtna Construction and Primary Products Corp. reported a profit this year for the first time since construction of the trans-Alaska pipeline was completed and just won a 15-year extension on a pump station maintenance agreement.

ALEUT CORP.

The Aleut Corp. of Anchorage owns land on the Alaska Peninsula and the Aleutian, Shumagin and Pribilof islands. Managing and extracting sand, gravel and rock aggregates as part of its subsurface rights within the region has provided a source of revenue, but the...