I hope you have been able to get out and enjoy this beautiful summer we have been having. Whether you are fishing, hunting, boating, hiking, or just enjoying the great outdoors, please be sure to take extra precautions to keep you and your family safe. Just as we make sure we are prepared before going out and recreating, safety comes first when preparing for the field season. With Alaska’s short construction and field work windows, the summer months are typically very busy for our operations. Before setting out, our staff makes sure they are properly attired and trained and have the right equipment to keep them safe in the remote, and often unpredictable, environments we work in. We operate in some of the most extreme environments on the planet, and this vigilance is what allows our staff to return home safely.
Recent headlines have undoubtedly caused concern for our shareholders and companies across all industries. Ahtna is confident in our ability to weather the rampant inflation, surging commodity prices, global supply chain delays, and fuel price escalation. We are continuing to monitor the challenging economic headwinds and their impacts on our contracts. The impact of inflation, which is the highest we’ve seen in over 40 years, will be a challenge for our existing contracts and the bidding of future contracts. The Consumer Price Index (CPI) is up 9.1% for June 2022 and while supply chains constraints magnify the inflation and geopolitical risks add to the economic uncertainty. We will be conservative in bidding on new fixed-price contracts.
Prices continue to soar for things like building materials (up 20% for 2021 and 5% since the start of 2022), steel (up 127% for 2021), diesel (up 76% as of May 19, 2022), and other commodities. Lumber prices, which nearly tripled in a 6-month period through March, have started to come down, but builders have yet to see the effects. A doubling of tariffs on Canadian lumber imports into the U.S. has increased price volatility. Steel prices have started to go the other way with excess supplies, rising inventories, and shrinking demand.
We recently held a meeting with our subsidiary leadership to discuss reducing negative impacts on our contracts by minimizing claims and maximizing revenues. Our subsidiaries have been tasked with focusing on achieving earnings and positive cash flow and they have steadily moved towards those goals. Despite these challenging times, we have exceeded our budgeted financial earnings for the first half of the year, and we are seeing continued progress on growing our backlog, while keeping our expenses down.
We held Ahtna Netiye’ (AN) Strategic Planning sessions with the Board in June where we discussed our long-range plans and AN growth, direction, and organization to become a $500 million/year company. Part of this future growth will include acquisitions and procurement of strategic equipment and technology assets that will enable us to self-perform more projects.
We are excited about a new US Coast Guard (USCG) contract that subsidiary president Brenda Rebne was able to successfully win. Ahtna Professional Services, Inc. was the successful bidder on 6 of 8 USCG security services contracts with a value of $143 million over 5 years. The contract includes 14 project sites with locations in Guam, Hawaii, New York, Texas, Michigan, Massachusetts, Connecticut, Florida and Puerto Rico. Over 200 new employees have been hired to meet the contract’s needs. The USCG is a very big client of ours and we work with them across several subsidiaries.
Partnerships are also a key part of our strategic growth plan. Ahtna Solutions, LLC is working with a leading design and engineering company to submit a new Small Business Administration (SBA) Mentor/Protégé application. Ahtna Solutions will be seeking to grow its capabilities to service federal clients in new geographies and to broaden our portfolio of federal clients. I hope to be able to share more in the fall issue of the Kanas.
At approximately 10:06 a.m. Alaska Time on June 20th, 1977, the announcement of “We have oil in!!!!!” was broadcasted from Pump Station 1. This past month marked the 45th anniversary of the day that the Trans Alaska Pipeline System began moving oil to Valdez, crossing 55 miles of fee simple Ahtna lands and 197 miles of Ahtna’s traditional areas. This includes the four villages of Gulkana, Gakona, Tazlina and Kluti-Kaah. We are very proud of what the Ahtna people did to make this happen, including the welding of the first pipe laid at Tonsina River on March 27th, 1975. The unique and special partnership between Ahtna and Alyeska Pipeline Service Company has helped ensure the safe passage of more than 18 billion barrels of oil from the North Slope to Valdez. Our leadership participated in a special gathering at the Glennallen Response Base (GRB) on July 7th with Alyeska’s executive team and our Ahtna Construction employees to celebrate this remarkable milestone.
Many of our shareholder and employee events had to be put on hold the past couple years to protect everyone’s health and wellbeing, so we are all thankful to see a gradual return to in-person events. I appreciated being able to share more about Ahtna’s current performance and future plans at the Annual Meeting and enjoyed meeting new people and catching up with familiar faces. We were also able to host our employee picnics this summer which staff always looks forward to. The picnics provide an opportunity for us to have some fun, share good food and show our appreciation for the integral role each of our employees play as part of the Ahtna family. We could not do what we do without them!
Tom Maloney, Chief Executive Officer