Working together to reach a common goal: joint ventures help native corporations expand markets,...

As Native corporations continue to diversify their holdings and grow their interests within Alaska as well as outside the state, it can often benefit these businesses to find other companies to partner with on specific projects. Establishing joint ventures, which are partnerships or cooperative

"One of the biggest advantages to entering into a joint venture is that different companies bring different capabilities to a project," said CIRI Corporate Communications Manager Jim Jager, of the company whose subsidiaries are involved in joint ventures in telecommunications, government services, construction and oilfield services. "Joint ventures also enable the companies involved to spread the financial risk."

"If you partner with a company who is a leader in a specific market, or who has expertise in a certain area, you can sometimes establish a mentor/protege relationship," added Curtis McQueen, corporate affairs, Eklutna Inc. "You can benefit from your partner's successful track record in an industry where you might not have worked before."

EXPANDING AREAS OF EXPERTISE

CIRI (Cook Inlet Region Inc.) is a prime example of a company that has used joint ventures to expand its reach in certain industries. In 2005, the corporation, which has been in the telecommunications business for the past decade, teamed with T-Mobile USA to offer wireless telecommunication services in the Lower 48. One of CIRI's largest investments, the company invested $80 million in this joint venture, acquiring 36 licenses which enabled it to provide wireless services in markets including Seattle, Denver, Indianapolis, San Antonio, Austin and Kansas City.

In the tourism sector, CIRI teamed with Woodbine Development Corp., the interests of Sid and Lee Bass and other companies, to develop the 493-room Hyatt Regency Lake Las Vegas Resort, Spa and Casino in Henderson, Nev. The corporation also teamed with other tourism industry investors to develop the 349-room Ritz-Carlton, Lake Las Vegas and the 732-room Westin Kierland Resort and Spa in Phoenix/ Scottsdale. In 2005, CIRI again teamed with Woodbine Development Corp. and other investors to add the Hyatt Regency Lost Pines Resort and Spa in Austin, Texas to its portfolio.

"When we decided to invest in a new destination resort in the Lower 48, one of the things that helped us determine who to partner with was our past working relationship with specific companies," said Jager. "Having worked with these companies before, we knew that they were experts in the destination resort development business, and could help fill in areas where we might not have experience."

Closer to home, CIRI has teamed with Nabors Industries Ltd. as joint owners of two of Alaska's top construction and oilfield services businesses, Peak Oilfield Services Co. and Alaska Interstate Construction LLC (AIC). Peak Oilfield Service Co. provides equipment, maintenance, support and construction services to Alaska oil, gas and chemical projects on the North Slope, along the Kenai Peninsula and in Anchorage and Valdez. Alaska Interstate Construction LLC provides construction-related services to the oil, gas and mining industries, and has also recently expanded its scope to include public works projects.

ENTERING NEW MARKETS

One of CIRI's newest joint-venture partners is Eklutna Inc., who in September of 2006 entered into an agreement with Alaska Interstate Construction LLC (AIC) to extract sand and gravel in the Eklutna area. "This is the first joint venture where Eklutna has been involved with a major contractor," said McQueen. "This is very significant, because through AIC, Eklutua will become a major player in the construction market.

"It is also significant because historically, village and regional corporations do not always get along," he added. "In this joint venture, Eklutna and CIRI will be working together."

Alaska Aggregate Products (AAP), a wholly owned subsidiary of AIC, will extract and transport sand and gravel from Eklutna to Anchorage for use in construction projects. "For years, construction companies have been trying to get Eklutna to make the sand and gravel on our lands available to the Anchorage market, because it will cut their transportation costs in half," said McQueen, of the product that is currently brought in from the Mat-Su Valley. "About 1 1/2 years ago, we decided that it would benefit our corporation, who owns the surface rights to the land, to work with CIRI, who owns the subsurface rights."

In addition to the economic benefits that the joint venture will provide to both corporations, Eklutna's lands also will benefit from the project. "This venture dovetails with Eklutna's goal to restore fish habitat in the Eklutna River," said McQueen, of the waterway destroyed by past development by the military and other agencies. The reclamation plan developed by AAP includes careful extraction of excess sand and gravel from the river, and the construction of an over-wintering pond to help salmon fry survive through the winter.

PICKING THE RIGHT PARTNER

One of the biggest factors in making a joint venture a success is finding the right people with whom to form a relationship. In the case of Native corporation joint ventures, these can include other Native regional corporations, Native village corporations, or companies with no Native ties at all.

"The most important thing to look for is compatibility in your requirements-both partners have to bring things to the table," said Barney Uhart, president and CEO, Chugach Alaska Corp. "The services that our partners provide need to complement the services that we provide; their experience needs to complement ours."

Chugach Alaska Corp. is currently involved in five joint ventures. These include TCC (Tatitlek, Chenega, Chugach), which provides oil-spill response services for the Alyeska pipeline, Prince William Sound and the Port of Valdez through a joint venture with the village corporations of Chenega and Tatitlek; a joint venture with the 13th Regional Corp., providing construction management services for the Navy; and a joint venture with a small engineering firm in Anchorage, providing surveying services for oil companies and the Alyeska pipeline.

Chugach also has two joint ventures with subsidiaries of Afognak Native Corp., providing civil engineering and related services for the Air Force in New Mexico as Chugach Management Services Joint Venture (a joint venture between Chugach Management Services and Mutiiq Management Services), and base operations and support services for the Army at Fort Greely.

"Joint ventures aren't a big part of what we do-they probably only make up about 10 percent of our total business, because we like to do things on our own when we can," said Uhart. "Our typical joint venture is formed to take advantage of a specific opportunity-they are not formed to take advantage of the market as a whole."

Chugach also prefers to become involved in populated joint ventures, in which all employees involved are employees of the joint venture itself. This is different from an unpopulated joint venture, in which both partners bring some of their own employees to a team and each company manages its own percentage of the work.

"One of the biggest challenges in a joint venture is having a good understanding of who is running the show, if you will, because everybody does business differently," said Uhart. "This is why we prefer a populated joint venture-it allows us to take a consistent approach to the management of the project as the majority partner."

"One of the major reasons that joint ventures fail is when different partners have different end games," agreed Jager. "If what both partners want in the end is not aligned, the venture will fall apart. If one company's goal is to make a profit, and the other company's goal is to employ people, you are asking for trouble."

Jager gives the example of a shopping center in northeast Anchorage that CIRI and Browman Developers, a California-based developer, is building as a joint venture. "There are two ways to approach a shopping center," he explained. "One is to buy the land, build the center, rent it out until it is stable, and then sell it for a profit. The other is to build it, rent it and hold on to it to maintain continued cash flow.

"If the other company plans to flip the property, they will make different decisions, such as what material to use for the building, based on a shorter-term view," he added. "They won't think about long-term profitability or maintenance issues." For this reason, according to Jager, CIRI chose to partner with Browman Developers because of that company's preference for main-mining long-term ownership interests in the projects that they develop.

As more Native corporations begin to look for diversified investments, it is probable that they will continue to look for companies, both Native and non-Native, to partner with on specific projects. With clearly defined goals, complementary talents and a collaborative spirit, these joint ventures can benefit all of the companies involved.