AIDEA writes off $91.3 million

ANCHORAGE - A state agency is writing off $91.3 million it invested in two huge development projects that failed to make money.

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The board of The Alaska Industrial Development and Export Authority approved an audit Tuesday that writes down about half of its $50 million investment in Alaska Seafood International, a struggling seafood plant in South Anchorage. The agency also took a write down of about half of the $125 million it sank into the Healy clean-coal plant, which operated for a brief test period and has been mired in problems even since. A write down is official recognition of a loan or investment that won't be recovered.

The write downs were prompted by changes in accounting rules this year, designed to make governments more accurately portray the real value of their assets, said Deborah Sedwick, an AIDEA board member and state economic development commissioner.

The write downs occurred because the big projects no longer are worth what AIDEA listed them at in its financial books.

AIDEA will post a loss of $55 million this year instead of the $36 million profit it would have had otherwise, according to state Deputy Revenue Commissioner Larry Persily, a member of the AIDEA board.

AIDEA's mission is to grow the state's economy by providing loans and fostering public-private development projects, such as the Red Dog mine near Kotzebue. AIDEA helped launch Red Dog, the world's largest zinc mine, by partnering with a mining company and an Alaska Native corporation land owner. AIDEA owns a port complex and a 52-mile road connecting the mine to the dock.

Some of AIDEA's investments, including Red Dog, have been economic successes. But others, such as the seafood and coal plants, have been troubled or outright failures.

Sedwick said the write downs don't mean the projects are dead.

"Among a majority of board members, there's a reasonable expectation that at some point the majority owners of the seafood plant will come up with a plan that works. Not as big as the original plan, but something that works," Persily said.

In the case of the seafood plant, AIDEA hoped to take Alaska fish and turn the raw meat into tasty, easy-to-cook morsels. The factory was supposed to employ 450 people. But the project has produced little since it opened in 1999.

As far as the coal project is concerned, the AIDEA board has never considered pulling the plug, Persily said.

The federal and state governments in the mid-1990s chipped in for the $267 million Healy clean-coal project, just northeast of Denali National Park and Preserve. The coal plant grew out of a national competition, sponsored by the federal government, to test new technologies that could help solve the problem of acid rain.

The plant has been mothballed since 1999 while AIDEA haggles with Golden Valley Electric Association, the Fairbanks utility that was supposed to operate the plant and buy the power. Golden Valley said the plant was too costly to operate and maintain.

"We still feel like the plant is viable and we disagree with Golden Valley Electric," Sedwick said.

Negotiations are continuing to try to reach an agreement that would get the plant operating, she said.