Regional Native Corporation review.

• Author: Stricker, Julie
• Position: SPECIAL SECTION: Alaska Native Corporation Review - Company overview

[ILLUSTRATION OMITTED]

Alaska's Native regional corporations officially entered their 40th year in 2011, having grown into strong, diversified institutions. They've helped educate, hire and train generations of shareholders to be leaders, and have led a resurgence in Native culture and Native values. The corporations are looking ahead, but they maintain strong roots to their past.

In 1971, the federal government passed the Alaska Native Claims Settlement Act to settle aboriginal land claims. Under ANCSA, Alaska's Natives relinquished claims to their ancestral lands in exchange for 44 million acres of land and $962.5 million, which was divided between 12 regional and more than 200 village corporations. A 13th corporation was later created for Alaska Natives living outside the state. It received a share of the cash payout, but no land.

The corporations were given dual financial and social mandates. They were to create wealth for their shareholders and descendants, provide jobs and protect their social and cultural traditions.

It's been a mix of calm waters and rough seas, William Anderson Jr., president and CEO of Koniag Inc., wrote in a letter to shareholders.

"Unlike most corporations that begin small with an idea and a product to sell, Native corporations started with large assets and no clear vision on how to grow those assets into productive corporations," Anderson wrote. The corporations had to figure it out as they went.

"It's gratifying to know that today Alaska Native Corporations are more vibrant than any time in our history," he wrote.

As they've grown, the corporations have become an economic force in Alaska. Together in 2011, they accounted for $8.4 billion in revenue, thousands of jobs in Alaska and even more in the Lower 48 and around the world. All but one was profitable in 2011.

The corporations moved forward, despite battling a lackluster national economy still struggling to recover from the recession, and amid stronger competition for government contracts. The federal government is choosing to in-source more contracts and others have moved to the competitive marketplace.

Congressional backlash for sole-source contracts under the Small Business Administration's 8(a) program for minority and disadvantaged companies is causing uncertainty for many Alaska Native Corporations, some of which receive more than 80 percent of their revenue from 8(a) subsidiaries.

"We are--all the ANCs--are facing a very changing world on 8(a)," says Bob Sandt, CEO of Ahtna Netiye, who oversees the day-to-day operations of the corporation's subsidiaries. "There's a pretty substantial chill on many in the contracting business that's causing them to lean away from sole source."

The contracting business is moving toward the competitive marketplace, he says, which means changes in the way corporations will have to structure their subsidiaries and uncertainty for the next few years.

One overriding theme in every region is how to bring down high energy prices. Efforts to boost energy efficiency are widespread. Alternative energy projects are ongoing in several regions and wind farms are sprouting up on the tundra. The state's largest wind farm is expected to go online this summer in Anchorage, Cook Inlet Region Inc.'s Fire Island.

Another challenge is providing for future generations.

When ANCSA was passed, only those alive at the time were included in the corporation ownership. Those born afterward could only become shareholders if the shares were willed or gifted to them. In 1991, amendments passed that allowed corporations to vote on whether to enroll "afterborns." To date, several corporations have voted to include the "afterborns," greatly boosting the numbers of shareholders.

With the expanding shareholder rolls, the corporations are looking back to the land to help provide economic development in their region, and jobs and opportunities for shareholders. Natural resources, such as gold in the Calista and Bering Straits regions, copper and zinc in the NANA region, and oil and natural gas in Cook Inlet are likely to be big players in the next decade.

Arctic Slope Regional Corp.

Arctic Slope Regional Corp. serves shareholders from eight villages in the far northern reaches of Alaska. The corporation, with 11,000 shareholders of Inupiat descent, is based in Barrow, with administrative offices in Anchorage.

In 2011, Barrow-based Arctic Slope saw a boost from higher commodity prices, led by its Petro Star petroleum and marketing segment. Other business segments include energy support services, construction, government services and resource development.

Overall revenue was $2.5 billion, its highest ever. Since its incorporation 40 years ago, ASRC has distributed approximately $542.5 million in dividends. The fall 2011 dividend of $34.31 per share was down from 2010's record payout, which was not unexpected, according to a news release from President and CEO Rex A. Rock Sr.

"This distribution reflects the impact of declining North Slope oil production and other operational challenges, as well as the importance for the corporation to continually look for ways of diversifying its sources of revenue, and improving its sustainable earnings," he says.

ASRC is one of the largest Alaskan-owned companies, employing more than 10,000 people worldwide.

It expanded into Southeast Alaska with the acquisition of ASRC Construction Holding Co. by McGraw's Custom Construction Inc. in January 2012. The business, which employs more than 30 people, is based out of Sitka.

Climate change and the increase in commercial traffic is likely to have an effect on life and the economy of the North Slope. ASRC supports a stronger US Coast Guard presence on the North Slope to help safeguard its communities, and is keeping an eye on opportunities--as well as the challenges--that a warmer Arctic may provide.

Arctic Slope helps support two organizations that are focused on the North Slope community: Arctic Community Foundation and Arctic Education Foundation. In calendar year 2010, ASRC donated nearly $9 million to these two organizations. ASRC also donated nearly $320,000 in sponsorships to such groups as the Alaska Native Heritage Center and First Alaskans Institute.

Since 2007, ASRC has donated more than $1.06 million to tribal organizations.

Ahtna Inc.

[ILLUSTRATION OMITTED]

Ahtna Inc. went through major changes in 2011. The Glennallen-based corporation radically changed its structure into two major divisions. One, Ahtna Netiye, is the umbrella for the corporation's operating subsidiaries overseen by CEO...