Native regional corporations net income rebounded in 2014

Alaska Native corporations continue to grow in financial strength and are increasingly integrated into the state’s economy. In 2014 total revenues by the 12 Alaska Native regional corporations grew over 2013 in line with a five-year average, according to the latest financial reports on regional corporations released Dec. 1 by the ANCSA Regional Association.

ANCSA stands for the Alaska Native Claims Settlement Act that passed in 1971 and created the regional and village corporations.

The data is compiled and presented annually by the association, which represents the 12 regional corporations.

Total revenue for the corporations was $8.57 billion in 2014 compared with $8.49 billion in 2013.

Profits in 2014 took a sharp jump for the group, up 98 percent for the group compared with 2013, Kim Reitmeir, the association’s executive director, told the Anchorage Chamber of Commerce Nov. 30. Profits in 2014 were $304.9 million compared with $153.7 million in 2013. The difference is unusual, however, and more a one-year event. Aggregate net income was $389.5 million in 2010.

The corporations’ aggregate net income took a dip in 2013 compared with previous years.

However, net income for the group was still 11 percent higher in 2014 that the five-year average of net income.

“This is a result of management being more focused on getting value for shareholders,” Reitmeir said.

Meanwhile, total shareholder equity in the regional corporations, an important measure of the value of the businesses, was also up 8.6 percent in 2014, or about $4 billion compared with $3.8 billion in 2013, she said.

Dividends paid to shareholders dropped in 2014 compared with the previous year but that was mainly because of a large one-time dividend paid by one corporation in 2013, Reitmeir said.

“Several of our corporations are now paying annual dividends that are larger than the Permanent Fund Dividend. This is something retailers should pay attention to,” she told the chamber.

The corporations are also “giving back” a big share of net income, in charitable contributions, support given to nonprofits, scholarships and dividends, which totaled 60 percent of profits in 2014, Reitmeir said. Over five years the average has been 75 percent.

Meanwhile, the increasing diversification of the Native corporations is being felt throughout the state’s economy.

“It’s difficult to find an industry that Alaska Native corporations are not involved in,” she told the chamber.

The corporations have long been engaged in the basic natural resource industries like oil and gas, minerals and timber, but now they are in fields like commercial and residential real estate, financial services and telecommunications and offshore fisheries support.

Of strategic importance for Alaska, however, is that the majority of the corporations’ earnings are from outside Alaska, in the form of income on investments and earnings of subsidiaries that operate in the Lower 48 and elsewhere.

Some of these are minority 8(a)-designated firms, a U.S. Small Business Administration classification that allows preferences in federal contracting for minority-owned businesses. The regional corporations are now less dependent on 8(a) contracting, however.

“The 12 regional corporations have seen a 7 percent decline in 8(a) revenues over the last five years,” Reitmeir said. This is partly due to several of the corporations’ subsidiaries having “grown out,” or graduated, from the minority preference program so that they now fully compete with other companies for private contracts.

Several of the regional corporations have also decided to reduce their 8(a) involvement for policy reasons, partly because of criticism of the program from certain people in Congress.

Among the regional corporations, one still has 30 percent of its total business operations in the 8(a) field, the largest share for a corporation in 8(a) business, while the corporation with the smallest share has 10 percent of its business operations in 8(a), Reitmeir said. Overall, the regional corporations took in 28.5 percent of their total revenue from 8(a) contracting in 2014 compared to 42.9 percent in 2010.

The ANCSA Regional Association compiles and publishes the data to build an understanding of what Native corporations contribute to the economy. The information is incomplete, however, because it does not include data from Native village corporations, several of which are substantial businesses and employers.

The regional corporations’ report used to include data from several major village corporations, but this ended, “because there are now many village corporations that are doing very well,” Reitmeir said.

Alaska Native corporations were formed in 1971 with the passage by Congress of the Alaska Native Claims Settlement Act, which returned 44 million acres of Alaska’s 365 million acres to Native ownership and paid $965 million in a cash settlement in lieu of lands not returned.

“Many people think the $965 million was seed money to get the Native corporations started in business, but it was really a settlement,” and compensation for lands taken, Reitmeir said.

The new corporations did use the money to get started in the early 1970s, and while there have been problems and bumps along the road many of the corporations have grown into multi-billion-dollar business enterprises.

Passage of the 1971 claims act was also crucial to the development of the state’s economy at the time. The pending Native land claims issue had clouded title to many Alaska lands important for development including a corridor for the 800-mile Trans Alaska Pipeline System then being planned.

The federal government wouldn’t grant the pipeline corridor until the claims were settled, which put the oil and gas industry into a political alliance with regional Native groups to get the bill through Congress.

It took a second act of Congress to fully approve the oil pipeline, however. In 1973 Congress passed the Alaska Trans-Alaska Pipe Line Authorization Act, which cut through a thicket of environmental lawsuits that were blocking the pipeline.

The creation of a large privately-owned land base in Alaska would also boost the economy. Development of mineral resources, oil and gas and timber harvesting has happened since 1971 that wouldn’t have occurred had the lands remained in federal ownership.

Reitmeir recalled that many environmental groups worked against the land claims settlement.

“They didn’t want these lands going into private ownership,” she told the Anchorage chamber.

Tim Bradner can be reached at [email protected].

12/02/2015 - 2:11pm