ALASKA POWER
& TELEPHONE COMPANY
2000 ANNUAL REPORT
CONTENTS
Letter from the President
2
Board of Directors
3
Expanding Connections
4
Electric Service
6
Engineering & Construction
7
HydroWest
8
Prince of Wales Island Service Area
Upper Lynn Canal Service Area
10
11
Tok Service Area
12
Management Discussion
and Analysis
14
Five-Year Summary
17
Report of Independent Auditors
19
Consolidated Financial Statements
20
Company Directory
35
Map of Service Areas
36
President’s Letter
T
Robert S. Grimm,
President AP&T
he year 2000 was one in which we doubled our telephone customers from just over 6,000 to more than 13,000. It was also a year in
which our company came of age as a provider of internet services.
During 2000, our power division continued its extension of transmission
lines to bring affordable power to everyone within reach of our service
areas. Your company now serves more than 20,000 Alaskans who live in
communities from the most southerly islands of Southeast Alaska to the
tundra of the Arctic Circle, an area that spans 12 degrees of latitude.
The acquisition of the GTE telephone exchanges in 2000 consolidates our
position as a major player in the telecommunications of Southeast Alaska.
Along with the capital assets, we gained a group of highly skilled people
whose talents have greatly increased our capabilities.
Vernon Neitzer
We also acquired HydroWest in 2000, a company with hydroelectric interests in the Central American countries of Guatemala and Honduras.
These projects are located in rural areas of a remote region, very similar to
facilities we built and operate in Alaska. Other than the climate and the
foreign language, these are routine projects for AP&T, but the possibilities are virtually unlimited.
Senior Vice President, Engineering
Early in 2000 we implemented the first electrical power rate adjustment
in eight years. We’re proud that the increase averaged only 8 percent, well
below increases in the cost of doing businesses and the inflation rate,
adjusted over the eight-year span.
We are prepared to extend our hydroelectric power grid throughout Prince
of Wales Island. Such an island-wide power grid will greatly increase the
viability of including Prince of Wales Island in the Southeast Alaska Electrical Intertie, a proposed project to build a power grid connecting all of
Southeast Alaska.
Alan See
Executive Vice President, Construction
Howard Garner
Executive Vice President, Treasurer & CFO
........2
The federal government has committed to pay 80% of this intertie, and
has authorized an expenditure of up to $384 million. The majority of the
intertie will be submarine cable, with some overhead transmission lines.
Our company, uniquely qualified for construction projects of this type,
will actively seek a role in building this regional power grid.
In the year ahead of us, we will advance one of the most ambitious plans
our company has put forward: SE Alaska Fiber Link, a project that will
connect all of Southeast Alaska by a high-speed digital fiber optic cable
network. This plan envisions a system of 640 miles of submarine cable
with 14 cable landings.
Our financial statements for fiscal year 2000 show a company building
for the future. Building comes at a cost, and while our balance sheets
reflect AP&T’s financial strength, our 2000 income was below the previous year. This was due to unusually warm weather that reduced power
demand, the costs associated with the acquisition of the GTE Alaska telephone exchanges, and interest costs which were higher than expected.
The coming year promises better income returns. Interest rates are coming down, we have completed the integration of GTE Alaska within our
telecommunications division, and our power division is becoming increasingly efficient as we extend our hydroelectric grid.
AP&T looks back on the 1990s as a decade of explosive growth. We are
now consolidating this expansion in Alaska and extending our company’s
expertise to take advantage of opportunities in other countries.
As employee-owners, we take considerable pride that we can provide
some of the smallest communities in Alaska with the best power and
telecommunications services available.
Sincerely,
Robert S. Grimm
President
Board of Directors:
Left to Right:
Seated: Vernon Neitzer, Charles Heising,
Eleanor G. Smith, Jeffrey Michel
Standing: Greg Mickelson,
William Corbus, Tim Wilson,
Chairman Ralph Wilson,
Dean Lansing, Bob Grimm,
Alan See.
2000 Annual Report 3 . . . . . .
Expanding Connections
O
ur telecommunications staff are the ultimate “multi-taskers.” Take
Jason Spear, General Manager of AP&T Wireless. One day he’s
on top of High Mountain upgrading a microwave link, and the
next day he is in the Ketchikan office explaining the benefits of a local
area network (LAN) to a businessman.
At his Anchorage office, our man in charge of operations and construction, Tom Ervin, looks over plans to expand telephone exchange switching equipment while conversing with a data networking engineer about
a pilot project that has dramatically boosted data transmission rates.
Mike Garrett, who leads our telecommunications division, has the challenge of staying ahead of the curve of this rapidly developing industry just
to keep pace with his staff. Garrett, a certified public accountant and former
controller of AP&T, is as conversant with the complex regulatory environment as he is with the latest developments in communication technology.
Mike Garrett
President, Alaska Telephone Company
While Garrett is enthusiastic about the acquisition of the GTE Alaska
exchanges in Southeast, he says that the most important assets are the
talents of the people who work in those locations.
“In the year 2000 we added people to our telecommunication ranks who
greatly expand our capabilities,” Garrett notes. “With so many access
lines in so many different locations, and with such a demand by our
customers for voice and data services, the team members that joined AP&T
will be critical to our success in the coming years.”
The ambitious SE Fiber Link will make use of AP&T’s in-house talent like
no other project ever promoted by the company. The proposal is to link all
of Southeast — every community of any size — via 650 miles of submarine
Petersburg
Employees
........4
GTE Sites Acquired in 2000
Customers
fiber optic cable, requiring at least 14 landfalls. Engineers have been in the
field inspecting sites for landfalls in preparation for permit applications.
Locations
1,845
Haines/Klukwan
2,615
Petersburg
1,800
Wrangell
1,000
Metlakatla
100
Hyder
7,360 TOTAL
During 2001 we will be introducing DSL (digital subscriber line), an evolving technology that transmits data at high rates over existing copper wire.
Preliminary testing indicates the new service will be up to 20 times faster
than the fastest internet speeds currently available through copper wire
lines. DSL will be offered to customers first in Petersburg, then in succession to Wrangell, Metlakatla, Tok, Craig, Haines and, by the end of the
year, Skagway.
Last year, AP&T doubled the number of internet customers. Internet is
now provided through most AP&T telephone exchanges. With our DSL
capabilities, we expect continued rapid increases in the number of internet
customers over the next year.
It is the nature of regulated utilities like power and local telephone services that rates are set by a public commission and can only be adjusted
through a complex public process. However, internet, long distance, and
paging are competitive industries not subject to the rate structure supervised by the Regulatory Commission of Alaska. Consequently, AP&T is
able to bundle these services, offering our customers competitive discounts.
According to Garrett, internet service is just one aspect of the data industry. “We have some competition as an internet and data networking provider, but the demand far exceeds the supply of qualified service providers. This is an opportunity we have seized, and in the coming years we
expect to be one of the leading full-service data network providers in all
Alaska.”
Em
pl o
ye es
Haines Employees
l
a
M
k
e tl a
Wrangell
Employees
at
2000 Annual Report 5 . . . . . .
Electric Service
E
xtending hydroelectric power wherever practical is the ambition that motivates the management and staff of Alaska Power
Company.
Diesel systems are expensive to operate, and the electric bills to our
customers increase with the rising costs of diesel fuel.
“Our service area employees are rate payers themselves, and just like everyone else, they don’t like to see the extra cost of fuel on their bills,”
notes Arne Sather, president. “With hydro, the cost of producing electricity does not fluctuate like it does with diesel.”
Since Black Bear Lake went on line in 1995 and Goat Lake in late 1997,
AP&T has extended the power transmission grid in both areas.
Arne Sather
President, Alaska Power Company
The build out of the central Prince of Wales Island hydroelectric power
grid will be largely completed by the end of 2001. During 2000, South
Thorne Bay was connected, and before the end of the year, construction
was well underway to connect Kasaan. We expect to complete the Kasaan
hook-up by late spring 2001. Plans are prepared to extend the hydroelectric grid east to Hollis and south to Hydaburg.
In Upper Lynn Canal, residents of Dyea, near Skagway, will be connected
to the Goat Lake power grid during 2001. In Haines, which receives Goat
Lake hydropower via submarine cable, plans are in place to further extend power lines to unserved residents at Lutak Inlet once funding is
secured.
“Alaska and the energy industry are well represented in Washington D.C.,
and energy related issues at the state and federal level are receiving more
attention this year due to higher fuel prices and the energy situation in
the lower 48,” says Sather. “Our goal is to maximize the opportunities
this presents for AP&T and the communities we serve.”
Janet Paddock
Vice President,
Management Information Systems (MIS)
........6
Engineering/Construction
M
aking existing systems more efficient, extending our power
and communications grids, and installing a new stand-by
diesel occupied AP&T’s engineering division during 2000.
The extension of the hydroelectric power grid on Prince of Wales has
been so successful that the Black Bear Lake hydroelectric capacity is now
periodically exceeded during peak loading periods.
“Rather than add to the back-up plant at Craig, we put a new standby
diesel at Klawock, which is operated by remote controls we developed a
few years ago,” explains Vern Neitzer, Senior VP Engineering.
Expanding the hydroelectric grids of upper Lynn Canal and on Prince of
Wales will continue in the years ahead. The line extension from South
Thorne Bay to Kasaan will be completed by May 2001, and plans are
ready to build out the south Prince of Wales power grid with extensions
from Klawock to Hollis, and from the Hollis/Hydaburg highway junction
to Hydaburg.
Vernon Neitzer
Senior Vice President, Engineering
Other build out projects will extend power from Haines to the Chilkat
River Valley (served by THREA); from Skagway to Dyea; and from Tok to
Mentasta, Slana and Chistochina.
“Extending the hydroelectric power grid results in additional utilization
of hydro energy even if diesels are required for peaking,” Neitzer says.
“And as more of the previously isolated communities are connected, the
existing stand alone diesel plants can be relegated to a standby role, providing the required back-up generation capacity.”
Building sufficient hydroelectric plant to meet peak demands will occupy the engineering staff over the next few years. The Kasidaya Creek
run-of-river project near Skagway is licensed and a significant portion of
the funding is in place. South Fork, a similar project planned for Prince of
Wales Island, depends on economics.
“The construction schedule for South Fork will be driven by growth in
power demand. If fuel prices remain high, hydro projects become more
feasible,” says Neitzer.
Alan See
Executive Vice President, Construction
2000 Annual Report 7 . . . . . .
HydroWest
I
solated communities, rural populations, rugged terrain, and limitless hydroelectric potential—sound familiar? It’s not Alaska we’re
talking about, it’s Central America, where, through its recent purchase of HydroWest, AP&T now owns 25 percent of a 12 megawatt (MW)
hydroelectric project in Guatemala and 30 percent of a planned 50 MW
project in Honduras.
Since 1982 HydroWest has developed projects and manufactured equipment for small to medium size hydroelectric plants in the United States,
Central America, and elsewhere. Last year, HydroWest brought the
Pasabien project in Guatemala on-line, built an electric generating turbine for a project in Greece, and developed a proposal to design and
build equipment for a project in Ireland.
“It makes sense to bring AP&T and HydroWest together,” says Bob Grimm,
AP&T President. “The success of AP&T is founded on building projects
for communities with similar geography and energy needs as those in
Central America. We’re skilled in that area and our success is proven.”
Grimm is confident of Central America’s economic stability and the potential for developing hydroelectricity there. “Central America is seeking
to build a solid and independent infrastructure. Hydroelectricity will
help stabilize energy prices by decreasing their dependence on foreign
oil. The high-head hydroelectric projects,” adds Grimm, “which AP&T
and HydroWest specialize in, do not require extensive reservoirs and
subsequently have little impact on the environment.”
Hydroelectricity also supports the worldwide effort to reduce carbon dioxide emissions by reducing reliance on fossil fuels and the burning of
rainforest wood.
Paul Berkshire, who heads AP&T’s energy development section, agrees.
“Our approach, past and present, is to work with strong local partners,”
Berkshire says. “Strong partners and knowledge of the energy markets
give us confidence in investing there. Central America is energy short
and they need us. Their geography and energy needs are similar to our
original niche—Alaska. This is a good fit for us.”
Left to Right
William Holveck
Chief Engineer
Paul Berkshire
President, HydroWest Group, LLC
Jorge Manrique
Director of Central American Operations
........8
Berkshire has been appointed by AP&T as HydroWest’s president.
“Berkshire’s experience developing energy projects for AP&T, plus his
years as a consulting engineer for hydro projects throughout the United
States, made him an obvious choice to run HydroWest,” says Grimm.
“His Pasabien project in Guatemala is up and running and is producing
above original projections.”
HydroWest is headquartered at AP&T’s office in Port Townsend, where it
shares technical expertise with AP&T staff and reports to the AP&T Board
of Directors. A turbine design and manufacturing unit is located in Seattle and, to better serve clients in Central America, an office in Guatemala City was recently opened.
Policy reforms in Guatemala and Honduras have supported significant
economic growth over the last ten years, upwards of 5 percent annually.
Many live in poverty, but the economic opportunities in both countries
are growing at such an impressive rate that the gap between rich and
poor is narrowing each year.
“The best part,” says Berkshire, “is that HydroWest is working with countries that recognize hydroelectricity as environmentally and economically
responsible. With the trend toward low-impact energy sources, we can
help Central America build their economies and protect the environment.”
In keeping with AP&T’s “community-minded” philosophy, every new
project will include a social project aimed at bettering the surrounding
community.
GUATEMALA
BELIZE
MEXICO
Caribbean Sea
Rio Hondo
Pasabien
Cangrejal
HONDURAS
Guatemala City
Tegucigalpa
Pasabien
EL SALVADOR
NICARAGUA
•
•
12.5 MW Existing
Rio Hondo II 50 MW Proposed
Cangrejal
50 MW Proposed
Pacific Ocean
2000 Annual Report 9 . . . . . .
Prince of Wales Island
S
eptember 2000 marked the 5th anniversary of the Black Bear
Lake Hydroelectric Project. The project has generated 100
million kilowatt hours of power, an amount of energy that
would have otherwise required burning 7.5 million gallons of diesel fuel
at a cost of almost $8 million.
Greg Mickelson
Regional Vice President,
Prince of Wales Island Service Area
When Black Bear Lake began generating power, the peak demand only
drew 60% of the project’s 4,500 kilowatt capacity. In December 2000, the
demand of our customers on the Black Bear Lake power grid drew 5700
kilowatts, an excess in demand that was met by running our backup
diesel generators. Such demand and the rising cost of fuel have increased
the feasibility of the plan to build the South Fork run-of-river project at a
site just downstream from Black Bear Lake.
In April of 2000, the POW hydroelectric power grid was extended to
South Thorne Bay, completing the first phase of our company’s efforts to
connect nearly every community on the island’s road network to hydroelectric power.
Prince of Wales
Chamber of Commerce
Honors AP&T as
Business of the Year
On the telecommunications side, we are now the island’s ISP (internet
service provider), providing dial-up service for Craig, Klawock, Thorne
Bay and Hydaburg. Within the coming year we expect to offer our customers DSL (digital subscriber line), a technology that vastly increases
the bandwidth capacity of copper wire telephone lines. In this we’ve been
greatly aided by the addition of Gary Thompson as our telephone manager. Thompson has extensive experience with digital systems.
As employee owners of this company, and as residents and rate payers,
we will continue our efforts to keep power and communication rates low
by providing more efficient services to an expanding customer base.
“Expansion is their
business, but they do
so in a manner that the
young and old of POW
can afford, which
makes AP&T a
company that cares in
a world where very
few do.”
Craig
Employees
. . . . . . . . 10
Stan Selmer
Upper Lynn Canal
M
rs. Blodwen Reed of Dyea is now wired to the information age.
Mrs. Reed, one of the area’s elders and the widow of Morgan
Reed,* was honored in early 2000 with the first hook-up to
the new 6-mile line built by AP&T that connects Skagway to Dyea, the
gateway to the Chilkoot Trail.
At about the same time, AP&T became Skagway’s ISP (internet service
provider), giving Mrs. Reed, her Dyea neighbors, and all of Skagway
access to the worldwide web.
A change most Skagway customers did not notice was the removal of the
old back-up diesels, but it is such cost efficiencies that help keep power
rates stable.
In Haines, the big change for 2000 was the consolidation of the telephone
and power services, now housed at a single conveniently located downtown office. Andy Eggen, service area general manager, says that labor
costs are down ten percent. “The service crews are now integrated,” says
Eggen. “In these kinds of businesses, the people and equipment can work
together.”
As of November 17, 2000, AP&T began providing local dial-up for Haines
internet customers. With bundled services, Haines consumers enjoy the
same internet discounts offered to other AP&T service areas.
Andrew Eggen
Vice President, Alaska Power Company
With the acquisition of the GTE exchanges, Haines consumers now enjoy
the same benefits as do consumers in Skagway: one office that provides
customer services for telecommunications, electrical power, and access to
the worldwide web, with the cost saving efficiencies of formerly separate
labor forces that now work together.
* Elected in 1958 to serve in the first legislature
of the State of Alaska.
Skagway
Employees
2000 Annual Report 11 . . . . . .
Tok Region
O
ver the last ten years, AP&T’s step-by-step expansion throughout the Tok region has extended reliable, cost-effective electric and communications services to new customers without
adversely affecting our existing customers. This methodical approach has
helped us grow to become the successful region we are today.
Don Mahon
Tok Service Area
Extensive mineral exploration continues in the Tok region. A very promising precious metal deposit was recently located in the vicinity of
Northway, with access to the Alaska Highway. We are communicating
with North Star Exploration in anticipation of providing energy and communication services for future mining operations.
Alaska Power & Telephone is now the Internet provider in the Tok Division with service in Eagle, Northway, and Tok.
With the digital world at our heels, cable lines are the crucial link. During the 2000 construction season we laid approximately 40,000 feet of
communications cable extensions. Most of the cable was buried, which
has cut back dramatically on the maintenance time required by our technicians during the winter. The new underground cable will make it much
easier for AP&T to deploy DSL in the Tok exchange in the coming year.
We continue to research technological innovations to reduce our customers’ energy costs. We are presently reviewing the economics of installing
a “fluidized bed combuster biomass thermal power plant,” a facility designed to burn low grade fuel efficiently and cleanly. We recently requested funding from the appropriate agencies to extend our transmission grid to those highway-connected communities that presently require
stand-alone diesel generators for electrical power. By connecting these
communities to our larger, more efficient Tok generating plants, we can
provide a growing number of customers with lower cost energy.
Tok
Employees
. . . . . . . . 12
Alaska Power & Telephone Company
and Subsidiaries
Year 2000
Management Discussion
and Consolidated Financial Statements
Contents
Management Discussion ........................................................................... 14
Report of Independent Auditors .......................................................... 19
Audited Consolidated Financial Statements
Consolidated Balance Sheets .............................................................. 20
Consolidated Statements of Income .............................................. 22
Consolidated Statements of Stockholders’ Equity ............ 23
Consolidated Statements of Cash Flows ................................... 24
Notes to Consolidated Financial Statements ......................... 25
2000 Annual Report 13 . . . . . .
Management Discussion and
Anaylsis of Financial Condition and
Results of Operations
Howard Garner, Executive Vice President, CFO & Treasurer
and Russell A. Smith, Vice President, Controller
Summary
N
et income in 2000 was $1.36
million on operating revenues of $23.61 million
compared to net income of $2.25 million on operating revenues of $19.51
million in 1999.
Basic earnings per share in 2000 were
$1.13 on 1.21 million weighted average
common shares outstanding compared
to $1.89 on 1.19 million weighted average common shares outstanding in 1999.
Basic book value per share in 2000 was
$17.78 compared $17.34 in 1999.
Net income in 2000 was negatively impacted by interest expense of $3.62 million, compared to $2.95 million in 1999.
Additional interest charges were primarily due to the increase in long-term
debt. Debt totaled $75 million in 2000,
and $54 million in 1999. The proceeds
from new borrowings were used to make
acquisitions in key areas, according to
our strategic focus, i.e., gain efficiencies
in the delivery of services, increase earnings and build value for the future.
In August of 2000, we completed the
purchase of a 38% share of the assets
. . . . . . . . 14
and related liabilities of GTE Alaska, a
subsidiary of the GTE Corporation. In
September 2000, we purchased 100%
of the Members Equity in Hydro West
Group LLC, a subsidiary of Puget Sound
Energy, Inc. (See Note 4 to the Consolidated Financial Statements.) These two
acquisitions are expected to significantly
impact our future, as they help to align
the company’s strengths in the telecommunications and power industries with
our strategy to diversify from the core
business operations.
Operating Revenues - Electric
Total kilowatt-hour sales to all consumers in 2000 were 63.2 million, compared
to 63.5 million in 1999. Sales were reduced as a result of the mild weather
throughout northern Alaska and the decline of the timber industry in Southeast Alaska.
Electric operating revenues increased $2
million in 2000 because of several factors: the charges to our electric customers increased by $1.2 million, $600 thousand of which was due to a 5% rate increase effective January 2000, the other
half attributable to increased diesel fuel
costs for electric generation; and the remaining increase of electric revenues
was due to increased revenues of Goat
Lake Hydro Inc, our wholly owned hydroelectric subsidiary located near
Skagway.
The rates for the hydro-electric subsidiaries were finalized during 2000. The
increase in electric operating revenues
included $761 thousand for the creation
of a regulatory asset. In accordance with
the provisions of Statement of Financial
Accounting Standards No. 71, “Accounting for the effects of Certain Types
of Regulation”, we have recorded a regulatory asset, which will be collected in
future years. (See Note 3 to the Consolidated Financial Statements.)
were due to labor costs and general and
administrative expense. Depreciation
expense increased $580 thousand in
2000 compared to 1999 due to the addition of assets acquired from GTE Alaska
and other new plant placed into service
during the year.
Operating Revenues Telecommunications
Other Income
Combined telecommunication revenues
in 2000 increased by $2 million from the
prior year on a 147% increase in access
lines in the fourth quarter due to the
purchase of GTE Alaska exchanges in
Southeast Alaska. The increase in access
lines is expected to add $5 million in
regulated telephone revenues in 2001.
Non-regulated telecommunications revenues increased by $69 thousand from
the prior year.
Operating Expenses - Electric
Electric generation fuel expense increased $510 thousand in 2000 compared to 1999 as a result of rising diesel
fuel costs. Non-fuel expenses increased
$1.15 million in 2000 . due to increased
labor costs and general and administrative expense. Depreciation and amortization expense increased $130 thousand
in 2000 due to new plant placed into
service for the addition of customers and
improvements to our distribution and
transmission systems.
Operating Expenses Telecommunications
Combined telecommunication operations and maintenance expenses increased $1.10 million in 2000 compared
to 1999. Regulated telecommunications
had an increase of $1.20 million in 2000,
while non-regulated telecommunications operating expenses decreased $100
thousand from 1999. Overall increases
in operations and maintenance expenses
105.8
70.7
83.2
75.5
42.7
Other income decreased $1.42 million
in 2000 compared to 1999. The negative
impact was due to a loss from construction contracting revenues of $349 thousand that was recognized in 2000, compared to a gain of $957 thousand in 1999.
Management considers the loss a onetime event and was the result of an unfavorable arbitration settlement related
to the Tyee transmission line project in
Southeast Alaska. (See Note 11 to the
Consolidated Financial Statements.)
Other income from construction activities is expected to add significantly to
consolidated income in the next several
years as the company increases its investments in that business.
’96
’97
’98
’99
Total Assets
’00
($ in Millions)
23.6
19.5
16.5 16.8
13.7
Interest Charges
Interest expense net of interest income,
increased $664 thousand in 2000 compared to 1999 as a result of additional
borrowings of $25 million. The new debt
was used to fund the purchase of the
GTE Alaska assets, and to enhance our
utility infrastructure. $800 thousand of
new borrowings was interest free debt
provided by the State of Alaska for a
transmission project to enhance the living conditions of communities on Prince
of Wales Island. New debt included
$1.72 million owned to Puget Sound
Energy related to the purchase of Hydro-West Group LLC.
’96
’98
2.1
2.2
’99
’00
($ in Millions)
2.3
1.9
1.4
’96
continued page 16
’97
Revenues
’97
’98
Net Income
’99
’00
($ in Millions)
2000 Annual Report 15 . . . . . .
Management Discussion, Continued
1.87 1.87 1.91 1.89
1.13
Income Taxes
Provision for federal and state income
taxes decreased to $583 thousand in
2000 from $1.17 million in 1999. The
decrease was primarily the result of
lower pretax income. The effective tax
rates were 30.0% in 2000 and 34.2% in
1999. (See Note 8 to the Consolidated
Financial Statements.)
Net Income
’96
’97
’98
Net Income
’99
’00
($ per Common Share)
1.00
.90
.86 .88
Liquidity and Capital Resources
.80
’96
’97
’98
Cash Dividend
Net income in 2000 was $1.36 million
compared to net income of $2.25 million in 1999. This was due to unusually
warm weather that reduced power demand, the costs associated with the acquisition of the GTE Alaska telephone
exchanges, and interest costs which
were higher than expected.
’99
’00
($ per Common Share)
We believe the Company has adequate
internal and external resources available
to meet ongoing operating requirements,
including construction expenditures.
The planned expenditures for 2001 are
for transmission, distribution and continued investments in business development. We expect that presently foreseeable capital requirements for the
Company’s existing business will be financed primarily through internally
generated funds. Additional debt or
equity financing may be needed to fund
new business development activities.
Operating Activities
Net cash provided by operations was
$5.16 million in 2000, compared to $4.96
million in 1999, representing a $196
Howard Garner
Executive Vice President,
CFO & Treasurer
. . . . . . . . 16
thousand increase in cash provided by
operating activities. . Non-cash depreciation charges of $4 million, $785 thousand from deferred income taxes and
other changes in operating assets and
liabilities contributed to the net cash
provided by operations.
Investing Activities
Net cash used in investing activities was
$25 million in 2000, compared to $9
million in 1999. During 2000, $2.5 million was used to fund the acquisition of
Hydro West Group, LLC, and $15.6 million to acquire certain assets of GTE
Alaska, which together totaled approximately $18 million. Capital expenditures
of $6 million for construction in 2000
were used to meet continuing customer
growth and to fund improved efficiencies of our telecommunications and energy delivery systems.
Financing Activities
Net cash provided by financing activities was $20 million in 2000, compared
to $4.5 million in 1999. The borrowings were used for investments, working capital requirements, debt payment
of $12 million, and dividends of $952
thousand. Proceeds from the sale of common stock were $1.25 million in 2000
compared to $1.07 million in 1999. Debt
at December 31, 2000, was $75 million
compared to $54 million in 1999. The
Company’s debt to total capital ratio was
78% at December 31, 2000.
Russell A. Smith
Vice President, Controller
Five-Year Summary
(Thousands of dollars, except per share amounts and statistics)
2000
1999
1998
1997
1996
Electric
Telecommunications
13,673
9,940
11,667
7,844
10,563
6,259
10,532
5,980
9,265
4,423
Total Revenues
% Increase
23,613
21%
19,511
16%
16,822
2%
16,512
21%
13,688
21%
Electric
% of Revenues
Telecommunications
% of Revenues
9,321
68%
8,274
83%
7,519
64%
6,588
84%
7,211
68%
5,130
82%
7,786
74%
4,453
74%
6,858
74%
2,870
65%
Net Interest Expense
3,623
15%
2,959
15%
1,594
9%
1,634
10%
1,235
9%
21,218
90%
17,066
87%
13,935
83%
13,873
84%
10,963
80%
% of Revenues
4,024
17%
3,301
17%
2,511
15%
2,388
14%
1,950
14%
% of Revenues
2,395
10%
2,445
13%
2,888
17%
2,639
16%
2,725
20%
(449)
-2%
975
5%
497
3%
486
3%
108
1%
% of Revenues
1,946
8%
3,420
18%
3,385
20%
3,125
19%
2,833
21%
% of Revenues
583
2%
1,168
6%
1,170
7%
1,030
6%
926
7%
% of Revenues
1,363
6%
2,252
12%
2,215
13%
2,095
13%
1,907
14%
1.13
0.80
17.78
6%
1.89
1.00
17.46
11%
1.91
0.90
16.62
11%
1.87
0.88
15.51
12%
1.87
0.86
14.37
13%
74,382
105,758
21,524
74,821
78%/22%
64,449
83,165
20,973
54,037
72%/28%
59,659
75,485
19,571
48,682
71%/29%
53,742
70,665
17,747
45,907
72%/28%
36,629
42,685
15,783
21,622
58%/42%
Results of Operations
Revenues
Expenses
% of Revenues
Total Expenses
% of Revenues
Depreciation Included
in Above Expenses
Operating Income
Other Income (Expense)
% of Revenues
Income Before Taxes
Income Taxes
Net Income
Per Common Share (Basic)
Net Income
Cash Dividends
Book Value at End of Year
Return on Common Equity
Financial Condition
Utility Plant, Net
Total Assets
Stockholders’ Equity
Debt at Year End
Debt/Equity Ratio
2000 Annual Report 17 . . . . . .
. . . . . . . . 18
ALASKA POWER & TELEPHONE COMPANY
REPORT OF INDEPENDENT AUDITORS
...................................................................................................
The Board of Directors
We have audited the accompanying consolidated balance sheets of Alaska Power & Telephone
Company and subsidiaries as of December 31, 2000 and 1999, and the related consolidated
statements of income, stockholders’ equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the
United States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the consolidated financial position of Alaska Power & Telephone Company and subsidiaries at
December 31, 2000 and 1999, and the consolidated results of their operations and their cash
flows for the years then ended, in conformity with accounting principles generally accepted in
the United States.
February 26, 2001
2000 Annual Report 19 . . . . . .
CONSOLIDATED FINANCIAL STATEMENTS
.........................................................................................................
Consolidated Balance Sheets
ASSETS
Year Ended December 31
2000
1999
$ 71,498,819
30,354,518
$ 67,862,147
14,197,174
101,853,337
29,763,655
82,059,321
20,217,422
72,089,682
2,292,427
61,841,899
2,606,965
74,382,109
64,448,864
977,046
6,989,038
735,478
3,833,593
9,189,921
783,041
6,753,104
6,753,104
23,909,109
12,105,216
263,618
783,016
4,735,393
—
1,359,177
361,822
360,886
3,477,390
447,431
1,199,544
347,894
57,815
385,793
297,708
7,466,689
6,610,798
$ 105,757,907
$ 83,164,878
Utility plant
Electric and non-utility
Telecommunications
Less accumulated depreciation
Utility plant under construction
Total utility plant, net
Other assets
Preliminary survey and investigation costs
Investments and other assets (See Note 3)
Goodwill – net of accumulated amortization of
$218,332 in 2000, and $113,713 in 1999
(See Note 4)
Special Funds – Restricted
(See Note 5 on Goat Lake)
Total other assets
Current assets
Cash
Accounts receivable, less allowance for
doubtful accounts of $29,441 in 2000,
and $22,508 in 1999
Contracts receivable
Fuel, supplies, and other inventory
Income taxes recoverable
Prepaid expenses
Costs and estimated earnings in excess of
billings on uncompleted contracts
Total current assets
See accompanying notes
. . . . . . . . 20
.........................................................................................................
LIABILITIES AND STOCKHOLDERS’ EQUITY
2000
1999
Stockholders’ equity
Common stock, $1 par value:
Authorized shares – 2,000,000
Issued and outstanding shares –
1,210,288 in 2000,
and 1,202,034 in 1999
Additional paid-in capital
Retained earnings
Total stockholders’ equity
$ 1,210,288
6,160,221
14,153,795
$ 1,202,034
6,027,600
13,743,575
21,524,304
20,973,209
22,235,187
50,540,775
22,453,769
30,450,020
72,775,962
52,903,789
6,696,570
225,054
5,981,046
207,910
6,921,624
6,188,956
1,041,309
1,042,043
166,842
240,918
2,044,905
779,159
917,236
97,704
171,223
1,133,602
4,536,017
3,098,924
$105,757,907
$ 83,164,878
Long-term debt
Goat Lake Hydro, Inc. note payable
(See Note 5)
Other notes payable, less current portion
Total long-term debt
Other liabilities
Deferred income taxes (See Note 8)
Customer advances for construction
Total other liabilities
Current liabilities
Accounts payable
Accrued taxes and expenses
Deferred income taxes
Customer deposits and advance billings
Current portion of long-term debt
Total current liabilities
2000 Annual Report 21 . . . . . .
.........................................................................................................
Consolidated Statements of Income
2000
1999
$ 13,672,643
9,940,620
$ 11,667,136
7,844,165
23,613,263
19,511,301
7,047,560
2,273,318
2,448,661
5,387,848
2,131,611
2,645,327
11,769,539
10,164,786
6,522,889
1,750,868
1,174,625
5,418,639
1,169,377
313,640
Telecommunications Expenses
9,448,382
6,901,656
Operating income
2,395,342
2,444,859
(349,130)
25,490
(125,583)
957,155
65,904
(47,775)
1,946,119
3,420,143
583,067
1,168,455
$ 1,363,052
$ 2,251,688
Basic earnings per share
$
1.13
$
1.89
Diluted earnings per share
$
1.11
$
1.86
Revenues
Electric
Telecommunications
Total revenues
Expenses
Operations and maintenance – Electric
Depreciation and amortization – Electric
Interest expense, net – Electric
Electric Expenses
Operations and maintenance –
Telecommunications
Depreciation – Telecommunications
Interest expense – Telecommunications
Other income
Gross profit (loss) on construction
contract revenues
Gain on sale of non-utility plant
Miscellaneous
Income before income tax
Provision for income taxes
Net income
. . . . . . . . 22
.........................................................................................................
Consolidated Statements of Stockholders’ Equity
Common
Stock
Balance at January 1, 1999
Net income
Cash dividends
Sale of common stock to ESOP
Sale of common stock
Repurchase of common stock
Common stock options exercised
Balance at December 31, 1999
Net income
Cash dividends
Sale of common stock to ESOP
Sale of common stock
Common stock options exercised
Balance at December 31, 2000
$ 1,177,534
Additional
Paid-In
Capital
Retained
Earnings
Total
$ 5,705,804 $ 12,688,063 $ 19,571,401
–
–
35,484
3,242
(31,726)
17,500
–
–
780,657
71,324
(698,010)
167,825
2,251,688
(1,196,176)
–
–
–
–
2,251,688
(1,196,176)
816,141
74,566
(729,736)
185,325
1,202,034
6,027,600
13,743,575
20,973,209
–
–
46,297
3,032
(46,437)
5,362
–
–
1,027,410
66,061
(1,064,376)
103,526
1,363,052
(952,832)
–
–
–
–
1,363,052
(952,832)
1,073,707
69,093
(1,110,813)
108,888
$ 1,210,288
$ 6,160,221 $ 14,153,795 $ 21,524,304
2000 Annual Report 23 . . . . . .
.........................................................................................................
Consolidated Statements of Cash Flows
2000
1999
OPERATING ACTIVITIES
Net income
$ 1,363,052
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization
4,024,186
Gain on sale of non-utility plant
(25,490)
Deferred income tax provision
784,662
Changes in operating activities:
Change in accounts receivable
(904,184)
Change in other; assets, liabilities, and receivables
(407,496)
Change in inventories
(35,650)
Change in income taxes
(13,928)
Change in accounts payable and accrued liabilities
378,940
Net cash provided by operating activities
$ 2,251,688
3,300,988
(65,904)
1,159,939
(216,009)
(832,083)
(52,897)
(339,295)
(237,931)
5,164,092
4,968,496
(6,222,146)
(15,621,634)
(2,509,186)
(1,060,475)
(241,568)
(8,161,554)
(916,215)
—
(253,418)
(140,170)
(25,655,009)
(9,471,357)
32,788,335
(12,004,859)
(952,832)
1,251,688
(1,110,813)
17,940,286
(12,584,439)
(1,196,176)
1,076,032
(729,736)
Net cash provided by financing activities
19,971,519
4,505,967
Net increase (decrease) in cash
(519,398)
3,106
CASH AT BEGINNING OF YEAR
783,016
779,910
CASH AT END OF YEAR
$ 263,618
$ 783,016
$
$
INVESTING ACTIVITIES
Acquisitions of utility plant
Acquisition of GTE Alaska exchanges
Acquisition of HydroWest Group, LLC
Other Investments
Preliminary survey and investigation costs
Net cash used in investing activities
FINANCING ACTIVITIES
Proceeds from long-term debt
Payments on long-term debt
Payment of cash dividends
Proceeds from sale of common stock
NON-CASH INVESTING ACTIVITIES
Transfer of amount in other receivables to
Investment in KEC
. . . . . . . . 24
497,481
—
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
..................................................................................................................................
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○
○
○
○
NOTE 1
○
○
○
○
○
THE COMPANY AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
Alaska Power & Telephone Company and subsidiaries (AP&T) supplies electric and telephone
service to several communities in the state of Alaska and acts as the general contractor on
certain construction projects. AP&T is subject to regulation by the Regulatory Commission of
Alaska (RCA), the Federal Communications Commission, and the Federal Energy Regulatory
Commission (the Commissions) with respect to rates for service and maintenance of its accounting records. AP&T’s accounting policies conform to generally accepted accounting principles
as applied to regulated public utilities and are in accordance with the accounting requirements
and rate-making practices of the Commissions.
Consolidation
The accompanying consolidated financial statements include the accounts of AP&T and its wholly
owned subsidiaries, after elimination of significant intercompany transactions and balances.
Revenue and Cost Recognition
The Company recognizes revenues from fixed-price and modified fixed-price construction contracts on the percentage-of-completion method, measured by the percentage of cost incurred to
date to estimated total cost for each contract. This method is used because management considers total cost to be the best available measure of progress on these contracts. Because of inherent
uncertainties in estimating costs and percentage of completion, actual results could differ from
those estimates.
Utility Plant and Depreciation
The cost of additions to and replacements of utility plant are capitalized. Cost includes direct
material, labor, and similar items and charges for such indirect costs as engineering, supervision,
payroll taxes, and pension benefits. AP&T capitalizes, as an additional cost of electric utility
plant, an allowance for funds used during construction (AFUDC), which represents the allowed
cost of capital used to finance a portion of construction work in progress for projects of more than
one year in duration. AFUDC consists of debt and equity components that, when capitalized, are
credited as noncash items to other income and interest charges. The cost of current repairs and
maintenance is charged to expense, while the cost of betterment is capitalized.
The original cost of utility plant together with removal cost, less salvage is charged to accumulated depreciation at such times as assets are retired and removed from service.
For financial statement purposes, depreciation is computed on the straight-line method using
rates based on average service lives. For income tax purposes, AP&T computes depreciation
using accelerated methods where permitted.
Goodwill
Goodwill is amortized on a straight-line basis over periods ranging from 15 to 40 years.
2000 Annual Report 25 . . . . . .
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
................................................................................................................................................
The Company and Summary of Significant Accounting Policies (continued)
Preliminary Survey and Investigation Costs
AP&T defers costs incurred for the preliminary survey and investigation of proposed construction projects in accordance with the rules of the Commissions. These deferred costs are capitalized into utility plant when the preliminary survey and investigation projects are completed or
are charged to expense in the period that a proposed project is abandoned. These projects are in
various stages of licensing and development and as of December 31, 2000, management believes no pending impairment exists.
Fuel, Supplies, and Other Inventory
Fuel, supplies, and other inventory are valued at the lower of cost or market on a first-in, firstout basis. The supplies and other inventory are primarily held for use in construction projects
including repairs and maintenance of the Company’s delivery systems.
Income Taxes
AP&T uses the liability method in accounting for income taxes. Accordingly, deferred income
taxes result from temporary differences in the recognition of income and expense for tax and
financial reporting purposes. The differences are primarily due to preliminary survey and
investigation costs and depreciation expense.
Customer Advances for Construction
Customer advances for construction of additions to the electric distribution systems are deferred and amortized through discounted service billings to the customer over a 60-month
period. At the end of the amortization period, any remaining balance is recorded as a reduction
of the respective utility plant accounts.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of FASB Statement No. 123, and
applies Accounting Principles Board Opinion No. 25 and related interpretation in accounting
for its employee stock option plans. Accordingly, the Company’s stock-based compensation
expense is recognized based on the intrinsic value of the option on the date of grant. Disclosure
in accordance with Statement 123 is provided in Note 10.
Earnings per Share
The Company has calculated its basic earnings per share data according to the method prescribed in FASB Statement No. 128 “Earnings per Share.” Under this Statement, basic earnings
per share are based on the weighted-average number of shares of common stock outstanding,
excluding any potential dilution that could occur if any outstanding options were exercised or
any other contracts to issue common stock were converted. Diluted earnings per share reflect
the impact of the dilution caused by outstanding stock options using the Treasury Stock Method.
FASB Statement No. 128 requires the dual presentation of basic and diluted earnings per share.
Average stock outstanding for purposes of calculating diluted earnings per share was 1,228,137
in 2000, and 1,207,858 in 1999 (including the dilutive effect of stock options of 21,976, and
18,074 respectively).
. . . . . . . . 26
.................................................................................................................................................
The Company and Summary of Significant Accounting Policies (continued)
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally
accepted in the United States requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those estimates.
○
○
○
○
○
○
NOTE 2
○
○
○
○
○
UTILITY PLANT
○
2000
Electric plant:
Hydroelectric
Other generation
Transmission and distribution
Other
Land
1999
$ 19,546,158
15,587,065
25,333,335
10,347,578
684,683
$ 19,531,805
14,904,219
23,405,780
9,290,997
729,346
71,498,819
67,862,147
6,012,853
10,679,148
11,678,294
1,730,240
253,983
3,199,389
5,997,341
3,841,375
1,056,151
102,918
Telecommunications
30,354,518
14,197,174
Total utility plant
$101,853,337
$ 82,059,321
Electric
Telecommunications plant:
General support assets
Central office assets
Cable and wire facilities
Nonregulated investment
Land
Annual
Depreciation
Rate
2%
4% to 8%
2.5% to 4%
2.5% to 20%
–
2.5% to 20%
8% to 13%
4% to 6%
10% to 20%
–
2000 Annual Report 27 . . . . . .
.................................................................................................................................................
○
○
○
○
○
○
NOTE 3
○
○
○
○
○
INVESTMENTS AND OTHER ASSETS
○
2000
Investment in CoBank
Investment in Ketchikan Electric Company
Investment in Inversiones Pasabien Hydro Project
Investment in Cangrejal Hydro Project
Investment in Alaska Network Systems
Rate stabilization asset
Other assets
$
951,545
1,405,487
2,304,161
205,025
234,998
760,718
1,127,104
$ 6,989,038
1999
$
794,148
908,006
—
—
234,998
—
1,896,441
$ 3,833,593
CoBank is organized similar to a cooperative and is owned by the customers it serves. As
such, a portion of CoBank’s earnings is returned to its customers. AP&T reinvests a portion
of those earnings in additional stock of CoBank based on a five-year average of the outstanding borrowings.
The Company owns a 50% share of Ketchikan Electric Company LLC (KEC). The principal
purpose and business of KEC is to construct, own, operate and manage a hydroelectric power
system in the Ketchikan Gateway Borough. The investment represents capital contributions to
KEC. As of December 31, 2000, management believes no pending impairment exists. (See Note 7)
The Company is subject to the provisions of Statement of Financial Accounting Standards No.
71, “Accounting for the Effects of Certain Types of Regulation” (SFAS 71). SFAS 71 allows the
establishment of regulatory assets for the allowable revenue requirement or the capitalization
of costs if those items are expected to be recovered in future rates. As of December 31, 2000, the
Company has a regulatory asset of $760,718. The Company continues to meet the requirements
of SFAS 71 since the Company’s rates are intended to recover the cost of service plus a rate of
return on the Company’s investment, as well as providing specific recovery of deferred items in
prior periods.
. . . . . . . . 28
.................................................................................................................................................
○
○
○
○
○
○
NOTE 4
○
○
○
○
○
ACQUISITIONS
○
During 1999, AP&T entered into an agreement through ATEAC Inc. to purchase the assets and
assume the related liabilities of GTE Alaska, a subsidiary of the GTE Corporation. The agreement is between GTE Corporation and ATEAC Inc., of which AP&T is a 25% shareholder. The
total purchase price of $43.35 million has been allocated to the shareholders according to the
book value, and any related liabilities, of the particular exchanges each shareholder has agreed
to purchase. Other assets as of December 31, 1999 included $916,215 which represented a
down payment on the purchase. Closing on the sale was completed on August 31, 2000, and
AP&T’s share of the purchase price was $16.53 million. The related goodwill created by the
purchase was $8.51 million, and will be amortized on a straight-line basis over 40 years. Financing for the purchase has been arranged through CoBank (See Note 5). The results of operations for the GTE exchanges are included from the date of the purchase.
On September 7, 2000, AP&T entered into an agreement to purchase 100% of the Members
Equity in HydroWest Group LLC, (HWG) a subsidiary of Puget Sound Energy, Inc (PSE). The
total purchase price of $2.5 million has been allocated to the assets. The principal assets of
HWG are a 25% equity investment in the Inversiones Pasabien Hydroelectric Project and a
30% equity investment in the Cangrejal Hydroelectric Project and are accounted for under the
Equity Method. Both projects are in various stages of start up, and there are no material transactions to report. Financing for the purchase has been arranged through PSE. (See Note 5)
2000 Annual Report 29 . . . . . .
.................................................................................................................................................
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○
○
○
○
○
NOTE 5
○
○
○
○
○
LONG-TERM DEBT
○
Long-term debt consists of the following:
2000
Goat Lake Hydro, Inc., note payable to secure Power Revenue Bonds
series 1997. Face amount of $23,000,000 less the original issue discount
of $304,813, and the bond sinking fund amount of $235,000, secured
by the Power Sales Agreement, a Construction Funding Agreement, and
all assets of Goat Lake Hydro, Inc. Interest rate average of 6% per year,
principal due in annual installments from 2000 through 2032
1999
$ 22,235,187
$ 22,453,769
Note payable, secured by BBL Hydro Inc., assets and revenues,
due in monthly installments, through 2022, at 7.17% fixed interest rate through 2002
7,632,724
7,751,425
Note payable, secured by telephone assets, due in quarterly installments through 2008, at 7.15% fixed interest rate
3,856,112
4,218,048
Note payable, secured by electric assets, due in quarterly installments through 2014, at 7.28% fixed interest rate
3,461,375
3,631,882
Note payable, secured by electric assets, due in quarterly installments through 2010, at 7.33% fixed interest rate
3,239,329
3,426,628
Note payable, secured by electric assets, due in quarterly installments through 2012, variable interest rate, 8.13% at December 31,
2000
5,662,785
5,891,908
Note payable, unsecured line of credit, due February 2002, variable interest rate, 7.99% at December 31, 2000
3,000,000
4,000,000
Note payable, secured by telephone assets, due in quarterly installments through 2015, variable interest rate, 8.13% at December 31, 2000
6,000,000
—
Note payable, secured by telephone assets and revenues, due in
monthly installments through 2015, variable interest rate, 8.13%
at December 31, 2000
15,719,875
—
—
1,300,000
Notes payable to State of Alaska, unsecured, with interest rates ranging from 0% to 4.2%, maturing at various dates
2,053,536
1,109,005
Note payable to PSE, secured by all assets of HGW, LLC, due in monthly
installments beginning 2002, at 8.5% fixed interest through July 2008
1,725,000
—
Other debt, unsecured, with interest rates ranging from 2% to 11%,
maturing at various dates
234,944
254,726
74,820,867
54,037,391
Less current portion
2,044,905
1,133,602
Total long-term debt
$ 72,775,962
$ 52,903,789
Notes payable to National Bank for Cooperatives (Co Bank):
Note payable to commercial bank, unsecured line of credit.
. . . . . . . . 30
.................................................................................................................................................
Long-Term Debt (continued)
Annual maturities for the five years beginning January 1, 2001 are $2,044,905, $5,626,628,
$2,982,200, $3,220,018, and $3,474,642, respectively, and $57,352,097, thereafter.
Note payable by GLH to secure the Power Revenue Bonds series 1997 is the result of the issuance on December 31, 1997 of a series of tax-exempt bonds by the Alaska Industrial Development and Export Authority (AIDEA). The proceeds are restricted in use, for the purpose of
financing the acquisition, purchase, construction, improvement, and equipment of the project
known as the Upper Lynn Canal Regional Power Supply System. Of these restricted funds, $2
million is required to remain in reserve for the term of the bonds. To secure payment of bond
principal and interest, AIDEA has assigned to U.S. Bank Trust National Association all rights
and interests in the note. The note is secured by all assets and revenues of GLH and a Power
Sales Agreement (PSA) between GLH and Alaska Power Co. (APC), both wholly owned subsidiaries of AP&T. The Regulatory Commission of Alaska has approved the PSA for the life of the
GLH note. This approval allows APC to charge its customers the entire annual costs as defined
in the PSA, i.e., principal and interest due on the bonds, all operating costs (excluding depreciation), general and administrative costs, and the return on equity permitted by the Commission. A portion of these annual costs is charged to the rate stabilization asset (See Note 3),
representing the amounts to be collected from customers in future years. The PSA requires all
GLH’s production and sales of electricity be sold to and purchased by APC for the life of the
agreement.
As of December 31, 2000, the Company had unsecured lines of credit of $4,000,000 from CoBank
and $10,000,000 from other commercial banks. This total of $14,000,000, less the outstanding
amount of $3,000,000, is available for general and other corporate needs.
Interest paid on debt was $4,075,569 in 2000, and $3,373,242 in 1999.
○
○
○
○
○
○
NOTE 6
○
○
○
○
○
OPERATING LEASE AGREEMENTS
○
AP&T leases its administrative office and a portion of its utility plant under noncancellable
leases expiring through 2011. Rent expense was $301,560 and $276,286 for 2000 and 1999,
respectively. Certain of the leases include renewal provisions at AP&T’s option. Minimum rental
commitments under noncancellable operating leases, excluding hydroelectric operations, are
$397,594. Minimum annual rental commitments are $57,039 in each of the next five years.
Additional cancelable lease agreements have been secured for the use of the land for hydroelectric operations. The term of the agreements extend for the life of the hydroelectric license of 50
years. Rent expense for hydroelectric operations was $158,892 in 2000, and $133,010 in 1999.
2000 Annual Report 31 . . . . . .
.................................................................................................................................................
○
○
○
○
○
NOTE 7
○
○
○
○
CONSTRUCTION CONTRACT COMMITMENTS
○
The Company has signed a fixed price construction contract totaling $17.2 million with KEC
(See Note 3) to build the Mahoney Lake Hydroelectric Project. License requirements and
permitting were performed during 1999 and 2000. The detailed engineering work is scheduled for 2001 and the primary construction efforts are expected to begin in the year 2002. A
construction line of credit from CoBank to KEC will supply the financing requirements for the
Project. Obtaining funding of the construction line of credit is subject to the completion of a
Power Sales Agreement between KEC and Ketchikan Public Utility, and will be secured by the
assets of KEC.
○
○
○
○
○
NOTE 8
○
○
○
○
INCOME TAXES
○
The components of the consolidated provision for income taxes are as follows:
2000
Current:
Federal
State
$ (185,316)
(16,279)
Deferred
1999
$
10,806
(2,290)
(201,595)
784,662
8,516
1,159,939
$ 583,067
$ 1,168,455
Total tax expense differs from that computed at the statutory federal income tax rate due to
the following:
2000
Income tax provision at federal rate of 34%
State income taxes, net of federal benefit
Amortization of deferred investment tax credits
Benefit of cash dividends paid to ESOP members
Other
. . . . . . . . 32
1999
$ 661,680
107,145
(12,804)
(138,079)
(34,875)
$ 1,162,849
189,049
(12,807)
(173,408)
2,772
$ 583,067
$ 1,168,455
.................................................................................................................................................
Income Taxes (continued)
The components of the deferred tax assets and liabilities as of December 31, 2000 and 1999
are as follows:
2000
Current:
Deferred tax assets
Deferred tax liabilities
Long-term deferred tax liabilities
Total net deferred tax liability
1999
$ (142,982)
309,824
$ (109,761)
207,465
166,842
6,696,570
97,704
5,981,046
$ 6,863,412
$ 6,078,750
Federal and state income taxes paid were $ 40,000 in 2000, and $650,000 in 1999.
○
○
○
○
○
○
NOTE 9
○
○
○
○
○
EMPLOYEE STOCK OWNERSHIP PLAN
○
AP&T maintains an employee stock ownership plan. All employees who have completed one
year of full-time service (1,000 hours) and have attained the age of 21 are eligible to participate
in the plan. Participants may elect to contribute from 1% to 16% of their wages to the plan,
which can be invested in the common stock of AP&T or into other investment accounts. Employer contributions match the participant’s contributions up to the first 3% of the participant’s
wages. Employer matching contributions were $157,429 and $136,719 in 2000 and 1999, respectively. Additional employer contributions are made annually at 8% of the eligible employees’ gross wages. These additional employer contributions were $419,809 and $233,832 in 2000
and 1999, respectively. Employer contributions are allocated to all plan participants as of December 31, the end of the plan year. The plan provides that participants’ interests in employerfunded contributions become fully vested after five years of full-time employment. ESOP shares
outstanding are included in the earnings per share calculations.
2000 Annual Report 33 . . . . . .
.................................................................................................................................................
○
○
○
○
○
○
NOTE 10 STOCK OPTION PLAN
○
○
○
○
○
○
In 1991, AP&T established a stock option plan. The plan provides for the grant of incentive
stock options. Stockholders have approved a total of 250,000 shares to be reserved for the plan
from the authorized and unissued common stock. These options vest and become exercisable
five years after the date of grant and expire ten years after the date of grant. The effect on net
income and earnings per share of the fair value approach under FASB Statement No.123 is not
materially different from those amounts recorded under APB 25. A summary of the activity
related to the plan is as follows:
Shares
Under
Option
Weighted Average
Exercise Price
Per Share
147,000
$ 18.29
Granted
38,500
23.00
Canceled
(11,500)
17.81
Exercised
(17,500)
10.59
156,500
20.34
Granted
45,500
24.00
Canceled
(11,000)
21.73
Exercised
(3,000)
17.40
188,000
$ 21.19
Balance at December 31, 1998, unexercised
○
○
○
○
○
○
NOTE 11
○
○
○
○
○
SUBSEQUENT EVENTS
○
On March 8, 2001, AP&T entered into an agreement to purchase 40% of the common stock of
Summit Alaska Inc. Summit Alaska Inc. (SMI) is an Alaskan Corporation located in Anchorage, Alaska. The principal purpose and business of SMI, is road building and paving which is
conducted primarily through fixed-price and modified fixed-price construction contracts.
The total purchase price of $1.1 million will be accounted for as an investment under the
equity method. Financing for the purchase has been made with the Company’s available lines
of credit. (See Note 5)
. . . . . . . . 34
Engineering Services
Alaska Telephone Company
Alan See, Executive Vice
President, Construction
Paul Berkshire, Vice President,
Energy Development
(360) 385-1733
[email protected]
Serving Skagway and Haines.
Wrangell
Stan Selmer, Regional Vice
President
Andy Eggen, Vice President &
General Manager, Power
Operations
David Vogel, General Manager,
Telecommunications
Wendell Hewes, Manager
20 Front Street
PO Box 289
Wrangell, AK 99929
(907) 874-3000
Fax: (907) 874-3913
Skagway
Michele Gunyah, Office
Manager
47 Tait Street
PO Box 400
Metlakatla, AK 99926
(907) 886-5100
Fax: (907) 886-1115
AP&T Wireless, Inc.
Serving: Craig, Hydaburg, Coffman
Cove, Juneau, Ketchikan, Metlakatla,
Petersburg, Sitka, Wrangell and
South Thorne Bay.
Jason Spear, General Manager
14 Borch Street
Ketchikan, AK 99901
(907) 225-1950
1-800-764-1950 (in Alaska)
Fax: (907) 225-4169
[email protected]
Prince of Wales Island Service
Area
Serving: Craig, Klawock, Hydaburg,
Hollis, Naukati, Whale Pass, Coffman
Cove, Edna Bay, South Thorne Bay,
Meyers Chuck and Goose Creek
Industrial Area.
Greg Mickelson, Regional Vice
President
Jay Hansen, General Manager,
Power Operations
Gary Thompson,
General Manager
Telephone Operations
PO Box 39
7th & Water Streets
Craig, AK 99921-0039
(907) 826-3202
Fax: (907) 826-3210
[email protected]
(907) 983-2202
Fax: (907) 983-2903
E-mail: [email protected]
PO Box 459
5th & Spring Street
Skagway, AK 99840-0459
Haines
(907) 766-2331
Fax: (907) 766-2384
E-mail: [email protected]
PO Box 30
241 Dalton Street
Haines, AK 99827-0030
Tok Service Area
Metlakatla
Petersburg
Mikel McCreary, Manager
300 North First Street
PO Box 647
Petersburg, AK 99833
(907) 772-3000
Fax: (907) 772-9224
Serving: Tok, Northway, Tetlin, Dot
Lake, Chistochina, Healy Lake, Dry
Creek, Mentasta Lake, Chisana,
Slana, Tanacross, Bettles, Jim River
Camp, Alatna, Allakaket, Evansville,
Alcan Border Station, Eagle and
Eagle Village.
Don Mahon, Regional Vice
President
Eric Hannan, General Manager,
Power Operations
Bruce Messerschmidt, General
Manager, Telecommunications
Tok
PO Box 207
Milepost 1314 AK Hwy
Tok, AK 99780-0207
(907) 883-5101
Fax: (907) 883-5815
[email protected]
Bettles
Tim Fickus, Telephone
Technician
(907) 692-5212
Market Maker
McDonald Investments, Inc. is a
market maker in the Common
Stock of Alaska Power & Telephone Company in the Pink
Sheets. For further information
please call:
Mr. Darrell A. Patrick
(937) 223-1256 or (800) 344-1406.
Member NYSE/SIPC.
Eagle
David Helmer, Manager
(907) 547-2323
2000 Annual Report 35 . . . . . .
AR
C A N A D A
CT I
CC
A L A S K A
SERVICE AREAS
IR C
LE
Bettles & Evansville
Jim River Camp
Alatna & Allakaket
Eagle
Healy Lake
Dot Lake
Tok
Tetlin
Alcan Border Station
Northway & Northway Village
Chisana
Fairbanks
Customer Service Centers
Dry Creek
Tanacross
Mentasta Lake
Chistochina
Telephone Service
Power Service
Anchorage
Wireless Phone Service
Skagway
Klukwan
Haines
Juneau
Sitka
Petersburg
Wrangell
Whale Pass
PR
Hyder
Coffman Cove
IN
Edna Bay
CE
OF
W
AL
Naukati
Klawock
Craig
S. Thorne Meyers
Chuck
Bay
Ketchikan
Hollis
ES
Metlakatla
IS
LA
Hydaburg
ND
1,967 2,971
5,524 5,698
Retail Electrical Customers
1990
1994
1999 2000
1,995
4,095 5,098
12,620
1990
1994 1999
2000
Telephone Access Lines Served
2,049
Internet Customers
2000
. . . . . . . . 36

contents

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