Investment losses trim profits at Bristol Bay

Bristol Bay Native Corp. may see its net profit take a hit this year because of the lagging stock market, but the good news is that the Alaska Native regional corporation’s operating companies are doing well.

BBNC, the regional corporation for the Bristol Bay area of Southwest Alaska, has about $84 million invested.

Like most portfolios, the corporations saw major declines in the value of its investments this summer.

Things have come back a bit since, and there are still several months left in the corporation’s financial year, but the outlook overall is for a slim profit, according to Tom Hawkins, BBNC’s chief operating officer.

However, a strategy of increasing its allocation of assets into operating companies through acquisitions appears to be paying off. All of BBNC’s operating subsidiaries are showing increasing revenues and profits, Hawkins said.

In its 2001 financial year, which ended March 31, BBNC earned $3.26 million with its operating companies, a substantial gain from the $798,000 in operating net earnings the previous year. The outlook for the current year is for profits of operating companies to climb further, according to corporation officials.

The regional corporation now has more than a third of its assets in operating companies, Hawkins said, and the goal is to increase the percentage to 50 percent, with the other 50 percent of assets in the investment portfolio.

One cloud on BBNC’s horizon has been dissipated. A $2.3 million investment in Alaska Marketplace, a failed venture into retail grocery stores, has been written off. This was largely responsible for a dip in BBNC’s net profit last year.

Associated Grocers believes Safeway Stores violated some covenants of its agreement to sell former Safeway stores in Alaska to Alaska Marketplace. An arbitration process on a claim against Safeway is now under way.

Meanwhile, BBNC’s newest acquisition is Vista Technologies Inc., a Huntsville, Ala. firm that provides highly technical engineering and environmental services to federal agencies, including nuclear safety and molecular biology.

The 12-year-old firm adds 250 employees and about $21 million in annual revenues to BBNC’s family of companies. Vista Technologies was merged into SpecPro, another BBNC company that provides environmental services.

Bristol Environmental Services, another BBNC operating company, is having a good year, Hawkins said, and may reach $28 million in revenues in the current financial year. The company has just completed a $12 million environmental cleanup job on the Aleutian island of Amchitka, site of underground nuclear tests in the 1960s.

Bristol is continuing to work on jobs at Adak, the closed naval air station, and has jobs with the Alaska Air National Guard. Significantly, the company has successfully expanded its services into construction management and engineering with a contract to support Bureau of Indian Affairs community infrastructure programs, Hawkins said.

The company has also just signed an agreement with the U.S. Environmental Protection Agency to do cleanup around fuel tanks on Native American land in the Lower 48, he said. This contract calls for activity of up to $15 million over five years, but the work is determined on a year-to-year basis.

CCI, another environmental services company, offers spill response services, installation of spill-prevention liners and tank cleanout service. About half of CCI’s work is on the North Slope with the remaining work in other parts of the state. The company has recently been working on a U.S. Coast Guard project. CCI reported a $1.14 million profit in the 2001 financial year and expects about $7 million per year in revenues in the current year.

Kakivik, another subsidiary, is an oil field services company specializing in corrosion control and inspection. Kakivik continues to work on North Slope contracts, mostly with Phillips Alaska, Inc. in the Kuparuk River and Alpine fields.

While highly trained professionals are the core of Kakivik’s staff, the company also hires entry-level helpers. This has opened opportunities for BBNS shareholders to work and be trained in a specialized, highly paid field, Hawkins said.

Two other BBNC companies, both small, are BBKP, an architectural services joint venture, and BBCS, an accounting and administrative services firm that assists Native village corporations in the Bristol Bay area with administration.

In the Seattle area, BBNC operates a fuel services company called PetroCard, which operates automated vehicle fueling stations.

The company sells about 80 million gallons a year, mostly to small and medium-size truck fleet operators, earning about $130 million in revenues. PetroCard brought a $2.4 million profit to BBNC in the 2001 financial year.

A challenge now faced by PetroCard is a general economic slowdown in the Pacific Northwest economy, but the company is weathering this better than competitors, Hawkins noted.

The synergy between most of these subsidiaries is that they are in various related technical, environmental and construction management fields. Most are 8-A minority companies, which confers benefits in bidding for federal contracts.

PetroCard is not a minority company because there is no particular advantage in its business of fuel sales.

The diversification into several related fields is healthy, Hawkins said. In earlier years BBNC had one big operating subsidiary, the Hilton hotel in Anchorage, which was vulnerable to uncontrollable shifts in tourism and general business travel cycles. BBNC sold the hotel to Hilton chain for a profit and reinvested in other companies.

11/25/2001 - 8:00pm