AP&T Annual Report, 2007 - Alaska Power and Telephone Company

CONTENTS
SPOTLIGHT
4
6
7
CHAIRMAN’S MESSAGE
50 Years Young
MISSION STATEMENT
Building Our Business
PRESIDENT’S MESSAGE
Building Our Future Together
B U I L
8
10
17
18
24
FEATURES
BUILDING IT TOGETHER:
An Overview of AP&T
Operations
ENERGY:
Building our Future: Clean,
Renewable Energy
HYDROWEST:
Building Togther
Internationally
TELECOM:
Building to Connect Our
Future
CORPORATE SUPPORT:
Building Togther Safely
Building Our Goals
I T
Building Our Communities
30
Building Our Legacy
SERVICE AREA MAP:
AP&T Service Areas
T O G E
2
Photo: Antenna site maintenance, High Mountain, Ketchikan

D I N G
32
37
42
FINANCIALS:
MANAGEMENT DISCUSSION AND
ANALYSIS:
Financial Condition and Results of
Operations
FIVE YEAR OPERATING RESULTS:
Financial Highlights
AUDITORS REPORT:
Moss Adams
STOCKHOLDER INFO:
(Inside Back Cover)
Notice to Shareholders:
Date, time, location of Annual
Shareholders meeting
Regarding AP&T Stock
Contact Information for sale and
purchase of shares
Disclaimer
Photo Credits
Production Credits
T H E R
3

CHAIRMAN’S MESSAGE
“BUILDING
IT
TOGETHER”
Mike Barry
Chairman of the Board, AP&T
50
Years young! As we
have celebrated our
50 th Anniversary it is appropriate
to reflect on the past and the
future. If we were starting our
company today it would be
named A E & C or Alaska Energy
and Communications, for that is
how we have evolved over our
history. We are still providing
many of the same basic services,
but the production and delivery
of those services has undergone
significant change and that will
accelerate in the future.
Board of Directors (left to right)
Mark A. Foster P.E.
Principal Mark A. Foster & Associates
Robert S. Grimm, President, CEO AP&T
Mike Barry, Chairman of the Board, AP&T
Industrial Development and Export Authority and
Alaska Energy Authority
William A. Squires JD, Senior V.P.
Blackfoot Telephone Cooperative
Tom Ervin
Gen. Manager, Telephone Engineering / Planning
4
On the energy side, we are
seeing cost of fuel increases that
may continue a long time. We
are seeing global pressure to
reduce carbon footprint. Our
customers recognize that their
cost of energy is one of the
factors that will determine their
global competitiveness. Without
innovation and open-minded
persistence to meet the
challenges, we could be faced
with a declining customer base.
How are we responding to these
challenges?
In the past 12 years, AP&T has
converted 81% of its energy
production from diesel to hydro.
Sure, this will reduce our carbon
footprint, but more importantly,
it will stabilize at a lower rate
the cost of energy to our

SPOTLIGHT 50 YEARS YOUNG
“BUILDING
AP&T
TOGETHER”
PHOTO: Face Mountain from Dewey Lake Reservoir
communications. In 2008 we will
accelerate completion of the
network. It is a positive signal
of how far we have advanced
in the past few years that we
were able to secure financing
on favorable terms for this
network from our major lender
CoBank.
Your Board of Directors
recognizes the employee/owners
as a great asset and enjoys being
able to work with you for the
good of all of our shareholders
and customers. Our growth is
tied to the organic growth of the
customers. The cost to produce
energy is very sensitive to scale
- it is difficult to operate small
electrical load systems at a low
cost. That said, we’ve found
carefully selected small scale
hydropower offers tremendous
savings over a long time frame
and will serve our customers
well, especially when compared
to other communities of similar
size that are off-grid. Rest assured
that we will continue to explore
new opportunities to lower costs
by embracing renewable or
alternative sources of energy
where economic.
On the communications side,
we are experiencing tremendous
change. Whether it’s voice or
data or video-wireless or
wireline, new technologies are
being applied to make users
more and better connected.
Another challenge is the fact that
the regulatory framework is
evolving and not always keeping
pace. We will not lose sight of
the basics. We are in a more
competitive business. That means
prosperity will depend on the
best customer service provided
by the low-cost producer. We
have an advantage that we will
strive to capitalize on. Our
employee-shareholders live in
the communities we serve and
certainly know their customers
better than the competition.
In 2007 we commenced
construction of the Southeast
Network which will lower our
costs, enable more and better
services, and strengthen our
competitive posture in
Mike Barry, Chairman of the Board, AP&T
communities we serve and we
are cognizant that the more
efficient our service, the more
likely the growth. Thanks to
employees and management for
the strong effort to put us in a
position to capitalize on the next
50 years!
5

SPOTLIGHTMISSION STATEMENT
“To be a Strong, Growing, and Innovative
Leader in the Energy and Communications
Industries.”
6
PHOTO: Customer Service Representatives

PRESIDENT’S MESSAGE
“BUILDING
AP&T
TOGETHER”
and reduce the price by not being
dependant on third parties to
provide the data transport we need.
In addition, it provides us with the
ability to generate additional
revenue by providing data transport
to other SE Alaska companies that
are already providing or wish to
provide communication services in
the region.
Robert Grimm
President, CEO AP&T
2
007 represented our
Company’s 50 th year serving
rural Alaska. Building the systems
to provide quality communication
services and safe, affordable and
reliable electrical energy to our
customers in rural Alaska has been
a challenging and rewarding pursuit
of our Company for half of a
century.
In 2007 Net Income was $3,000,922
as compared to $3,557,345 in 2006.
Earning per share in 2007 was $2.04
compared to $2.48 in 2006. This
is a decrease from the stellar
earnings experienced in 2006, yet
represents solid profitability as we
continue building key infrastructure
that will insure the future success
of our Company.
The Company currently owns
and/or operates six functional
hydropower projects. These projects
have reduced the use of fossil fuels
while still meeting the energy
requirements of our customers.
During 2007, 82% of the energy
requirements of our Alaska
customers were met using
renewable non-polluting energy
resources. This insulated our
customers from the high cost of
fossil fuel now occurring in rural
Alaska due to record prices being
paid for oil in the world. In addition
to the six hydropower plants now
operating, the Company also has
the Kasidaya Hydropower Project
under construction with a scheduled
completion date in 2008. In
addition, eight other hydropower
projects and two wind power
projects are in early and late stage
development. Our existing “green”
projects and the development of
more renewable energy projects
will allow us to continue to reduce
the carbon footprint of energy
production in rural Alaska. During
2007, the Company continued
building communication systems in
accordance with our technology
plan. This will insure that the
systems we are building have the
ability to provide advanced internet
protocol-based services that our
customers need and demand. These
services - voice, data, and video,
require increased bandwidth
capacity and as new features and
new products are developed,
additional bandwidth will be needed
as a result. The ability to transport
data between rural Alaska and the
rest of the world is a challenge.
This is especially true in SE Alaska
where data transport is capacity
constrained and very expensive.
To address this challenge we are
building our own network in SE
Alaska (SE Network). This network
will allow us to increase data
transport capacity
I am honored to serve as CEO of
a Company with so many talented
and dedicated employee-owners.
We enjoyed solid progress on a
number of business development
fronts that will insure the future
success of your Company. As you
enjoy this report, please take notice
of these employee-owners, as they
were the ones that really “carried
the water’ that produced another
profitable year.
Respectfully submitted,
Robert S. Grimm, President, AP&T 7

FEATURES A HALF CENTURY
PHOTO: Early shareholders meeting Skagway Circa 1963, L-R, Nancy Brown, Dick Brown, AP&T Founder,
Arthur Garrett, Marguerite Garrett, R.A. Stevens, Ralph Wilson
B
UILDING IT TOGETHER
A Half-Century of Success
at AP&T
2007 ushered in the 50th
anniversary of Alaska Power &
Telephone and a year-long
celebration of the company's
progressive service, innovation
and leadership in the Alaskan
utility and communications
industries. In 1957, two years
before Alaska became a state,
Arthur and Marguerite Garrett
joined with Hector Munn to
purchase a controlling interest
in Skagway's electric power
system. They also purchased
Skagway's telephone company.
And so, Alaska Power &
Telephone was born. Much has
changed since then. In 1957,
the price of gas was 24 cents a
gallon; a telephone was a
stationary object with a dial and
the web was a place for spiders,
not people. Fittingly, the theme
of this annual report is Building
It Together.
8
Plain and simple, we would not
be here now without the
supreme dedication and
uncommon spirit of our
employee-owners, who carry on
a proud tradition of supplying
essential communications and
energy services to Alaskans.
Together, over half a century,
AP&T employees have guided
Alaskans through technological
and communications advances
and into the digital age. AP&T
honors the pioneering vision of
our founders as we celebrate 50
years of growth, innovation, and
building together.
Alaska Power & Telephone is an
integral part of the communities
we serve, helping to power and
connect their lives. In addition,
most of our 142 employees live
and work in the communities
where we provide power and
communication services.
Bringing reliable, clean electricity
and state-of-the-art digital, fiber
and wireless communications to
rural – and often remote – areas
honors our history and the
pristine wildness of the land.
Servicing and connecting fellow
Alaskans is a sacred trust for us.
"Building It Together" is, quite
literally, what AP&T does dayto-day.
We depend on each
other to maintain and operate
one of Alaska’s most innovative
and reliable electrical systems in
operation today. When
temperatures reached an
incredible -70F below zero this
winter, reliability ceases to be a
convenience but can become a
matter of life and death. The
lights were on, dial tone was
there and high-speed internet
connections were operating. We
as employee-owners take pride
in ownership of the work we do
and the services we provide to
our friends and neighbors in our
Alaskan communities we call
home.
Working with and for Alaskans
often necessitates that power
and telephone crews brave the
harshest of conditions. From
frozen mountain-top
communication sites to the
chilling depths of the sea floor;
engineers devise ways to bring
state-of-the-art communications
and reliable energy to regions
where none had ever existed.
Service representatives help our
customers find the solutions they
need, while corporate office
personnel in Port Townsend
oversee the health of our
finances, employee benefits and
provide vital internal support
functions.

A HALF CENTURY OF SUCCESS
“ Building It Together" is, quite literally,
what AP&T does day-to-day. We depend
on each other as we plan and implement
projects that usher in sustainable energy
and improved communications ”
David Vogel - Telecom Manager, Skagway
There is perhaps no better or
more tangible testament to our
commitment to excellence – in
all that we do – than this: Over
the past twelve years, AP&T
employee-owners have built an
infrastructure that has
transformed our energy
production from 99 percent fossil
fuel-based to 82 percent
renewable – based production
in 2007. That’s called making a
difference.
In 2007, we were profitable for
the fifth straight year, posting
net income of $3 million, or
$2.04 per share. While down
from the $3.56 million ($2.48 per
share) in net income we totaled
in 2006, the 2007 numbers are
encouraging because they
stemmed from total revenue of
$37.6 million – a 3.1 percent
increase over 2006. That, of
course, means we’re growing.
The flip side of revenue –
expenses – explains why, with
greater revenue, net income
didn’t keep pace. Our costs in
2007 were up 7 percent from
2006, to $29.52 million. This
was due in part to the increased
cost of fuel, inflation, additional
labor costs associated with new
lines of business and the
increased costs related to
depreciation.
While we believe our cost
management efforts are
outstanding, the dip we
experienced in net income for
2007 is a reminder that we must
continue looking for ways to
work more efficiently and
effectively.
9

OPERATIONS
10
O
perations Overview
Energy, Telecom and
Non-regulated
An annual report is basically the
interpretation of the immediate
past to see how it will affect the
future.
With that in mind, 2007 set the
table for 2008 and beyond
through steady progress toward
the operational and financial
goals that will help ensure our
long-term stability and prosperity.
In two of our three operating
units, we produced greater
revenue than in 2006, and the
third was almost on par with
2006. At the same time, we
continued to build on our
reputation for outstanding
customer service, while also
making the critical investments
necessary for a strong future.
PHOTO: Ben Bobier, Lineman, Skagway
ENERGY
Building our Future: Clean,
Renewable Energy
Our electric power operations
generated $17.5 million in
revenue in 2007, an increase of
2.3 percent over 2006 that was
driven by a 2.7 percent increase
in kilowatt-hour sales. Operating
expenses grew 3 percent, to $11
million. The result of it all was
operating income of $6.5 million,
a slight increase from 2006.
In a prime example of the
bottom-line benefits of our
transformation from fossil fuel
to renewable energy sources,
consider that AP&T produced
more than 53 million kilowatthours
of hydroelectric power in
2007. Based on the year-end
cost of diesel ($2.50 per gallon),
it would have cost nearly $5.8
million more to generate the
same amount of power had we
not embraced renewable energy
technologies.
In 2007, we made significant
capital investments that will
temporarily put us behind budget
for 2008. However, over the
long term, those operating and
building costs will pay off
handsomely as we continue to
build a fiscally sound, sustainable
future.
The real bottom line for 2007
was the fact that we continued
to provide the best possible
energy services to the
communities we serve. Whether
starting new hydroelectric
facilities or participating in
leading edge green research,
AP&T remains at the forefront
of meeting consumer demand
in the most efficient ways.
Following on the heels of our
Black Bear Lake project in 2006,
we again received national
recognition for our hydroelectric
facilities. In 2007, AP&T’s Goat
Lake hydroelectric project
achieved Low Impact
Hydropower Institute
certification, making it the second
"low impact" certified project in
Alaska – along with Black Bear
Lake, Alaska’s 1 st – and just the
22 nd & 26th nationwide.
Certification of these projects
underscore our stewardship of
the land, as we work to be
mindful of river flow, water
quality, fish passage, watershed
health, endangered species
protection, and recreational use
and access.

BUILDING OUR FUTURE
“ Whether starting new
hydroelectric facilities
or participating in
leading edge green
research, AP&T
remains at the forefront
of meeting consumer
demand in the most
efficient ways. ”
PHOTO: Danny Gonce, Power Mgr., Haines
11

ENERGYBUILDING IT TOGETHER
A
side from the obvious
environmental and
customer service benefits of lowimpact
hydro, there are also
strategic benefits. In 2007, AP&T
sold Renewable Energy Credits
(REC) associated with the Goat
Lake and South Fork
hydropower projects. These
RECs, also known as “Green
tags” or Tradable Renewable
Certificates provide production
subsidies for electricity generated
from renewable sources. In
addition our South Fork project
qualified to receive a Production
Tax Credit (PTC) for Renewable
Energy for each kWh produced
for ten years. The low
incremental cost of these benefits
may eventually become a
significant source of revenue for
AP&T.
Continuing our mission to add
facilities that generate sustainable,
hydroelectric power our
immediate focus will be
investigating the feasibility of
small-scale hydropower
generation at Yerrick Creek near
Tok. In the meantime, we have
partnered with Caterpillar, Inc.
in a pilot program designed to
minimize diesel generation
emissions and maximize the fuel
efficiency of our current energy
production in Tok.
The latest developmental version
of the Cat C175 generator was
PHOTO: Penstock preparation, Kasidaya Creek Hydro Project, Skagway
installed in our Tok plant facility
in 2007. Though not without its
setbacks, our commitment in the
partnership to assist development
of a cleaner more efficient
generation product clearly
demonstrates our shared
commitment to stewardship.
The success we have had in
diversifying our energy profile
via hydro is prompting us to
look at other forms of
diversification, among them,
wind energy. We continue to
invest in our future by
researching and investigating
hydropower and wind energy
potential via the formation of
two new renewable energy
subsidiaries: Alaska Wind Energy
LLC and Village Windpower LLC.
We have identified seven sites
in the Alaskan interior that may
hold promise.
12

CLEAN RENEWABLE ENERGY
PHOTO: Alaska Wind Energy LLC
Wind Monitoring Tower, Delta, Alaska
One at Delta offers particular
intrigue. AP&T has partnered
with Lapp Resources, an
independent Anchorage based
energy exploration and
production company to permit
and test these sites. In 2007,
towers to monitor and collect
wind resource data were erected
in the hope of confirming the
viability of future wind farm
potential.
Preliminary findings have been
encouraging. Building on these
options offers the potential to
lower future costs while
shrinking our carbon footprint.
AP&T remains watchful for
opportunities to employ the use
of new and innovative
technologies to maximize
efficiency.
A prime example is our work
on a pilot program funded in
partnership with Alaska’s Denali
Commission. The Yukon River
Hydrokinetic Turbine Project is
– one of the world’s first – that
uses a river turbine to replace
fossil fuel power generation. A
prototype turbine-driven power
generation system to be placed
in the Yukon River at Eagle is
being designed to help determine
the viability of this new
technology both in Arctic regions
and throughout the world.
Onsite flow and generation
modeling studies were
conducted at Eagle in 2007.
Operating requirements have
undergone revision while a
preliminary turbine design was
completed. This revolutionary
design will be engineered,
manufactured and tested in 2008,
and installed in the first half of
2009. Each turbine is rated at
100kW. If successful in
preliminary testing, the use of a
3-turbine configuration would
supplant the current requirement
for diesel generation for up to
five months of each year’s energy
requirements for the 200
residents of Eagle and adjoining
Eagle Village.
13

CLEAN RENEWABLE ENERGY
PHOTO: Crews erect Delta wind monitoring tower
T
his year, further energy
construction in Alaska’s
interior included the completion
of the Chistochina 5.3 Mile Line
Extension.
AP&T crews set all remaining
poles in place, and installed new
meters with the last to be
installed in early 2008. Our Tetlin
Intertie was also completed.
The new underground segment
allowed Tetlin Village to
seamlessly join the Tok power
grid in October 2007 resulting
in an almost unheard of 50
percent reduction in the energy
rates paid by Tetlin customers.
Our preliminary survey of the
Soule River 80 MW Hydroelectric
Project continues. The British
Columbia Transmission
Corporation has completed an
interconnection feasibility study
with positive results. The “big
picture” significance of this for
AP&T is that the Soule project
will be significantly bigger than
any previous AP&T hydro project
– designed to offer 17 to 20 times
the generation capacity of our
Black Bear or Goat Lake facilities.
Once a suitable partnership is
formed to share the financial
burden and risk associated with
its construction, the future benefit
to AP&T comes via revenues
generated via agreements for the
sale of the energy generated
upon completion of the project.
In 2007, AP&T contractors
conducted fish surveys at Soule,
filed our Notice of Intent and
began the scoping process.
Construction of this project could
begin in 2012, once wildlife and
botanical studies, permitting,
licensing and final project design
are complete. Benefits to
Alaskans could include more
local jobs, and demonstrate
AP&T’s continued commitment
to a responsible future while
respecting the remarkable
landscape we serve.
“ By seeking out additional renewable energy
resources, AP&T is creating a future that focuses
on the needs of our customers and the
environment – and which promises to deliver
significant profits for our company and savings
for our customers... a true win-win."
– Robert Grimm, President - CEO
14

CLEAN RENEWABLE ENERGY
D
iscussions continue with
the Haida Corporation
on the 5 MW Reynolds Creek
hydroelectric project to aid
development. We remain
cautiously optimistic the project
can be completed by 2010. With
focused resolve from all parties,
this project will become yet
another reliable keystone of longterm
renewable energy for Prince
of Wales Island.
At our Prince of Wales Island
operation, power generation was
up 3.5 percent in 2007 while fuel
consumption was down 44.3
percent, thanks to the South Fork
hydro “run-of-river” project.
Kilowatt hour production at
South Fork increased 35 percent
in 2007, compared to overall
production of 2006. This was
due to 2007’s large snow pack
and the increased demand of
the floating fish processor barge
Atlantis to our Craig Feeder,
which contributed 686,400 kWh
to POW summer sales.
Uncooperative weather provided
additional challenges for some
of AP&T’s other hydro projects.
Black Bear Lake remained full
through fall 2007, but in
December water levels fell to a
record low. The last six months
of 2007 produced no meaningful
rainfall at either Dewey Lakes
or Lutak, and Goat Lake
remained at a historic low.
Consequently, the need to
supplement hydro production
with diesel in the first quarter of
2008 will be widespread in
Southeast Alaska. On a more
upbeat note, the Kasidaya Creek
hydro project in Upper Lynn
Canal is expected to be brought
online in late summer of 2008,
helping offset our need to use
diesel generation in the Skagway
and Haines areas.
Power generation at Skagway
and Haines increased 5.1 percent
and 10 percent respectively in
2007, compared to 2006. Haines’
gain stemmed largely from our
power sales agreement with
IPEC.
Building our Future: Clean,
Renewable Energy
By seeking out additional
renewable energy resources,
AP&T is creating a future that
focuses on the needs of our
customers and the environment
– and which promises to deliver
significant profits for our
company and savings for our
customers...a true win-win. "
– Robert Grimm, AP&T President
To assist with the capital costs
of building our innovative energy
projects, AP&T applied for – and
was awarded – $4.1 million in
grant monies to support our
growth.
PHOTO: Crews erect Delta wind monitoring tower
15

CLEAN RENEWABLE ENERGY
2
007 Project Grant Funding
$2.5 million to finish the
Kasidaya Hydroelectric Project;
and $1.6 for the in-stream
Hydrokinetic River turbine from
the Denali Commission for
placement in the Yukon River at
Eagle. Investing in our mutual
future, AP&T focused on new
resources at Goat Lake. Severe
weather can at times “freeze out”
our ability to use hydropower.
Without banked water, we are
forced to use diesel-based energy
until the Alaskan weather warms
enough to refill lake levels so
hydro production can resume.
AP&T’s permits allow for the
December rainfall, and the
coldest temperatures in Alaska
since the 1970s.
In concert with AP&T’s strategic
plan, our engineering staff
watches for opportunities to
partner with companies that may
not have the resources necessary
development throughout 2007.
Construction of the Kasidaya
Creek Hydro Project (formerly
Otter Creek Hydro) is nearly 80
percent complete. When
finished in summer 2008,
Kasidaya will generate
approximately 12 GWh annually,
the equivalent of powering 1,100
residential Alaskan homes per
year. One of the most significant
benefits Kasidaya will provide
is AP&T’s ability to “bank” water
16
alpine lakes we use as renewable
energy resources to be drawn
down to specific levels. Once
reached, hydro production must
cease. No more water may be
used until acceptable levels are
restored. Winter 2007 was a
prime example of this.
Hydroelectric generation
throughout Southeastern Alaska
was severely impaired by lessthan-typical
October through
PHOTO: Spring thaw, Yukon river at Eagle, Alaska
to fulfill the full scope of a project
in which they are involved. Such
collaborations generate additional
revenue, strengthen our stature
in the industry and build
community rapport. To that end,
in 2007 we have been assisting
the Gustavus Electric Company
with final design and
construction for their 800 kW
Falls Creek hydro project.
Construction began in 2006 and
is expected to be complete by
late spring 2008.

INTERNATIONAL
procurement, installation and
testing of the electro-mechanical
equipment. Most recent
estimates put the project cost at
$80 million and construction is
slated to begin in late 2008.
T
he 12 MW Pasabien
hydroelectric project, in
which AP&T owns a 25 percent
interest through HydroWest,
continues to serve the energy
needs of our Guatemalan
customers. Pasabien, which
became operational in 2000,
generated 56,787 MWh in 2007,
down 5.5 percent from 2006.
The drop was due to seasonal
variations in weather. Pasabien
is operated and maintained by
the employees of HydroWest de
Guatemala, led by General
Manager Eduardo Barrientos.
PHOTO: Monte Grande Computer Lab, Guatemala
Development of the 32 MW Rio
Hondo II hydroelectric project
in Guatemala continued to move
forward. Current efforts focus
on verification of land/legal
issues, final engineering and
preparation of contract
documents. AP&T has a 25
percent stake in the venture
through our subsidiary
HydroWest International.
Currently staff from HydroWest
is performing over all project
company management and will
be responsible for the
engineering, materials
Energy market prices continue
to escalate with the average cost
per kilowatt being close to 10
cents. At the end of 2007, the
project received a loan
commitment from the Central
American Bank for Economic
Integration (CABEI). When
completed, the Rio Hondo II
hydroelectric project is projected
to produce 132,000 MWh of
energy per year on average.
In keeping with our stated goal
of supporting the communities
we serve, Guatemalan students
continue to benefit from AP&T’s
contributions to the upkeep and
maintenance of schools in the
communities of Santa Cruz and
Monte Grande. In each of these
schools, HydroWest has provided
computer labs – complete with
air-conditioning, furniture and
instructors. In 2007, HydroWest
enhanced the computer labs by
providing satellite-based internet
service.
17

TELECOMBUILDING OUR FUTURE
comparison to 2006, when 2006
results are adjusted for a onetime
payment from the Alaska
Exchange Carriers Association,
base sales increased by $100
thousand. Operating expenses
were up by 5.8 percent in 2007
due in large part to the increase
in costs associated with the costs
of interconnecting our telephone
exchanges and an increase in
depreciation of plant in service.
The geography and climate in
which we operate make AP&T
unique among the nation's
telecommunications providers.
The level of skill and
commitment required of our
personnel to engineer, construct
and maintain our facilities in this
harsh environment is a testament
that continues to honor our 50
year legacy.
18
Michael Garrett, Exec VP
COO-Telecom, Treasurer
T
ELECOMMUNICATIONS
Building to Connect Our
Future
Our regulated
telecommunications operations
produced $14.3 million in
revenue in 2007.
PHOTO: Abby Trozelle, Customer Service Representative, Craig
Operating expenses which
totaled $12.5 million were up
5.8 percent. Operating net
income for the unit fell 33
percent to $1.8 million from $2.67
million in 2006.
While revenues in 2007
decreased by 1.4 percent in
Connecting Alaskans to the rest
of the world is one of our
primary goals. Communities in
isolated areas are benefiting from
the social and educational
advantages of being connected.
We hear tourists comment how
pleasantly surprised they are to
find Wi-Fi hotspots "way up
here." Powerful new technology
and installation of cutting-edge
equipment has made our voice,
data, broadband and wireless
services more accessible and
reliable than ever.

TELECOMMUNICATIONS
“ Phenomenal progress on
the SE Network was made
on the first phase of the
project in 2007.”
- Michael Garrett, Exec VP, COO-Telecom
We ended our 2007 construction
season with the completion of
a major piece of what is to be a
keystone project in AP&T’s
broader plans for the future: The
Southeast Alaska Microwave
Network (SE Network). We
brought the southernmost section
online – from Ketchikan to High
Mountain, Kasaan, Thorne Bay,
Village of Kasaan, Hollis, and
Burnett Peak into Wrangell.
The completion, of this leg of
the project, significantly increases
the availability of bandwidth and
will allow AP&T to create a new
revenue stream through the sale
of bandwidth to other entities.
It also allows AP&T to provide
broadband services outside our
traditional service areas.
Construction crews will use the
downtime provided by winter
weather to stage materials and
refine an incredibly aggressive
construction schedule for the
remaining mountain-top
sites planned in the SE
Network in 2008.
PHOTO: Crews set SE Network
tower section, Burnett Peak 19

TELECOMMUNICATIONS
In 2008, AP&T will be completing
and implementing an
interconnection agreement with
GCI for both the Petersburg and
Wrangell locations. The
agreement clarifies all of the
details ranging from
intercompany points of contact,
to the technical and legal aspects
of how and where the carrier’s
facilities will interface with AP&T.
The final agreement will be filed
with the Regulatory Commission
of Alaska (RCA) within the 1 st
quarter of 2008. We were initially
led to believe GCI would open
up shop and begin offering
competitive voice services early
in 2008. In reality, it now
appears more likely to happen
early-mid 2009. The majority of
effort directed in preparation for
their arrival was centered on
strengthening our customer
service, product and service
offerings, and reducing costs to
leverage our competitive
position.
AP&T teamed with David Saxby
and Measure-X to implement an
ongoing initiative to both
measure and build the skill sets
of our front-line personnel.
Continuing to build and maintain
a reasonable degree of customer
trust and loyalty is central to this
effort. Our Marketing and
Internet Services group huddled
to look at what the additional
bandwidth provided by our SE
Network will provide as a basis
to improve and bundle products
and services moving into 2008.
The lynch-pin in this mix is the
completion of those segments
of our new SE Network
connecting Petersburg and
Wrangell with Juneau. This
action provides the cost savings
of using our own network to
move voice and data traffic to
central hubs instead of relying
on other carriers; as well as
affording us fixed cost bandwidth
in much greater increments to
effect better service with a more
competitive pricing structure.
Building it together, telephone
crews worked elbow to elbow
with power crews in several
locations throughout 2007 to
complete construction on
projects that will serve customers
well. A premier example of this
intercompany
cooperation saw work
completed in the Lutak
area just outside
Haines on Lutak
Inlet. Crews
worked furiously the
summer of 2007 to
complete the Rural
Utility Service (RUS)
funded six-mile
underground line
extension designed to
connect area
residents to
20 PHOTO: Kasaan Mountain Microwave Antenna site, Prince of Wales Island

TELECOMMUNICATIONS
AP&T’s energy grid and
telecommunication network.
One of the goals of this project
was to protect the extraordinary
natural beauty of this region.
As a result, Lutak residents
became the first AP&T customers
with Fiber-to-the-Home and are
among some of the first rural
homes in the state to enjoy this
benefit. The technology
deployed at Lutak uses a Passive
Optical Network (PON) which
enables a single fiber to serve
multiple premises via the use of
optical “splitters.”
As if the engineering and
technical challenges were not
enough, AP&T crews also had
to battle Mother Nature to
complete the work. In October,
technicians in Haines had some
extra work thrown their way by
Chilkat brown bears. The bears
took issue with four fiberglass
pedestals and a major fiber splice
box smashing them to bits. "We
lifted the prints off one
pedestals," joked Bruce
Messerschmidt, local manager
of Telecom Operations, "they
matched a set already on file
with Fish & Game." Another
example of intercompany
cooperation occurred on Prince
of Wales when telephone and
line crews were put to the test
battling unusually harsh weather
in 2007 causing damages which
resulted in outages that took
considerable labor and resources
to restore. Whale Pass suffered
a major windstorm that destroyed
a large number of poles and
several sections of telephone
cable. Final costs to clean up
downed trees, to repair damaged
lines and facilities and to restore
power and telephone services
were close to $90,000 for this
small community. While the
damage was contained to just
one mile of line, only 4 poles
out of 16 remained upright. The
severity of this microburst
windstorm flattened about 40
acres of trees affecting a section
of line inaccessible by road.
Although the event affected only
12 customers, crews worked
diligently for several very long
days cutting through the
destruction to restore energy and
communication services. In the
end, local editorial columns were
filled with everything from kudos
to a short poem from customers
who were astounded by and
thankful for the dedication
shown by AP&T personnel.
Michael Garrett, Exec VP, COO-Telecom
21

TELECOMMUNICATIONS
PHOTO: Internet Network and Engineering Personnel, Anchorage
Skagway, Tok and Wrangell for
a total of 26 Hot Spots. In 2008,
AP&T will be adding 15 new
Hot Spots that will further boost
our Wi-Fi presence. In Skagway,
tourism is the main driver for
DSL and Wi-Fi broadband
services but new commercial,
residential and industrial changes
are also contributing to growth
in broadband services.
22
Other major projects included
the installation of new
Metaswitch soft switches and
OCCAM broadband loop carrier
platforms in Haines and
Wrangell. The equipment allows
AP&T to improve the profitably
of delivering additional enhanced
features and DSL. It also offers
the potential to provide advanced
voice-over-IP and digital video
services through a single allpacket
access network. In
December a Caller ID (CID)
promotion garnered many new
customers in Tok, Haines and
Skagway. Also in late 2007,
AP&T began offering voice mail
with email notification to many
of our communities, starting with
Prince of Wales Island and
Skagway with other sites to be
completed in early 2008. To
deepen our reach in the calling
features market, the development
of more bundled options will
soon follow. These projects and
others exemplify AP&T’s
continued commitment to
bringing state-of-the-art
telecommunication services to
rural Alaskan communities.
Building a broader range of
service offerings to meet
customer needs is an ongoing
priority.
Non-Regulated Technologies
AP&T’s Broadband Internet
services, including DSL and
wireless broadband, remain
strong as we move into 2008.
Subscriptions to Broadband
services increased by 445 new
customers in 2007. The 20
percent jump from 1,868 to 2,313
encompasses both new
subscribers and customers who
continue to migrate from dialup
service.
Similar to the Lower 48, the
growth of Wi-Fi services in
Alaska has been exponential.
AP&T now offers Wi-Fi service
in the communities of Craig,
Haines, Ketchikan, Petersburg,
Another AP&T 2007 success story
was bringing wireless broadband
technology to the Organized
Village of Kasaan, delivering the
opportunities associated with
telemedicine, distance learning
and other benefits to this remote
village. Construction of this
project began in early 2007 and
encompassed construction of a
mountain top communications
site and formation of a
community technology center.
AP&T’s delivery of Internet
service and the necessary
computers and equipment will
help move Kasaan into the digital
age. It is hoped that by
enhancing the local quality of
life, businesses and tribal
members will be encouraged to
return to or stay in Kasaan. With
the aid of a $1 million dollar
Federal RUS Community
Connections Broadband Grant,
the Kasaan system is up and
running providing a new
technology center for the
community. Plans call for added
coverage to nearby Kavilco
subdivision and Thorne Bay via
the new Kasaan Mountain
communications site.

TELECOMMUNICATIONS
“ Internet
access is
force for
innovation,
openness
and
economic
growth. “
– Bryant Smith, Director of Internet Services
The AP&T Internet services team
has been evaluating network
monitoring tools with high hopes
that a 2008 deployment of
upgraded monitoring will
provide better internal network
service forecasting and reduce
outage response time.
Ultimately, this should provide
a better quality of service for all
subscribers to our network
services.
In December, a personal visit by
Bryant Smith, Director of Internet
Services, to the Klawock School
district afforded the opportunity
to present AP&T’s proposal for
an E-Rate supported Internet
contract. We hope the resulting
renewal of their agreement for
a 3 year term paves the way for
similar receptivity on the part of
other districts.
PHOTO: Crews bury Fiber Optic Cable in Lutak area near Haines
“Internet access is force for
innovation, openness and
economic growth that we are
proud to provide to the rural
communities in Alaska. The
AP&T team is dedicated to
expanding our presence with
regard to Internet access available
to Alaskans and polishing the
products and services we
currently offer.”
– Bryant Smith, Director of
Internet Services
Other important non-regulated
activities for AP&T included the
installation of Direct TV, twoway
radio sales, LAN services
and the sale of ACS cellular
services. A major sales success
occurred when AP&T sold and
installed an E911 system (which
included two-way radios and a
key system) to the Wrangell
Police Department. This was
the result of an outstanding team
effort between the Ketchikan
and Wrangell locations to close
the deal and deliver the goods.
These activities provided a nice
exclamation point to our 50 th
anniversary year.
23

CORPORATE SUPPORT
"The crews spent
time making their
respective areas
ready for the
volunteer OSHA
inspection. Everyone
is to be commended
for the welcoming
spirit and
professionalism
shown to the OSHA
inspector upon his
visit.”
PHOTO: Safety Representatives attend Governors safety conference, Anchorage
–Eric Hannan
Interior Division Manager
Building Together: Safely
Under the leadership of the
Executive Safety Review
Committee and guidance of
Mickey Henton as Director of
Safety in 2007, we continued to
build the development of our
safety programs. From job
training to facility safety audits,
AP&T’s safety record has long
been exemplary. We intend to
continue to invest in our
employees and our corporate
future to keep that record strong.
In 2007, the AP&T Executive
Safety Review Committee (ESRC)
met to purchase automated
external defibrillators and to
develop a Pandemic Flu
Contingency Plan and an Arc
Flash Safety Program. We also
24
invited OSHA to perform a
voluntary inspection of the Tok
facility. The walk-thru inspection
helped to identify seven items
needing corrective action and
all have been corrected. Of just
as much value were the lessons
learned that can be passed on
and applied in our other
locations.
With ESRC approval, we utilized
the training services of Fall Pro
Group to become certified as a
fall protection trainer for AP&T
employees. Subsequent to that
certification, 54 AP&T employees
received appropriate fall
protection training for their
specific job requirements in 2007.
Annual safety visits were made
to nine AP&T locations for the
purpose of conducting personal
fall protection training, safety
audits, confined space training,
required hearing screenings,
records review and safety
meetings. “Safety City”
presentations – teaching electrical
safety in and around the home
– were given at the Haines and
Skagway elementary schools.
Monthly safety teleconferences
reinforced the message
throughout the year as we work
ever harder to cover all our safety
bases and vigorously resolve any
unaddressed issues. Safety audits
for 2007 have been distributed
to all relevant locations.
“Building Together Safely”
requires a team effort by ALL
AP&T employees, at every level.”
– Michael (Mickey) Henton,
Director of Safety

CORPORATE
“Employee ownership is not just a
catch phrase at AP&T, but a very
real attitude and way of life that
consistently delivers shared success
throughout the company.”
Arne Sather, VP, Director Human Resources
Building Our Goals: Shared
Ownership
Throughout our 50th anniversary
year, employee owners have
been more mindful than ever
that our shared goals lead to
heightened fiscal and operational
achievement and accountability.
We pay close attention to the
details that are key to customer
satisfaction, knowing that each
employee plays a crucial role.
In keeping with that tradition, a
third group of AP&T employeeowners
traveled to the ESOP
Association Employee Owner
Retreat in December.
PHOTO: AP&T Ketchikan Personnel
“Employee ownership is not just
a catch phrase at AP&T, but a
very real attitude and way of life
that consistently delivers shared
success throughout the
company,” states Arne Sather,
VP, Director Human Resources.
Thanks to the managers, safety
representatives, and all the
employees for their assistance
during the annual safety visits.
Each safety representative’s effort
is essential to maintaining our
safety program and for ensuring
safety compliance.
The support and direction
provided by AP&T’s ESRC
committee members (Arne
Sather, Eric Hannan, Bob Grimm,
Mike Garrett, Tom Ervin, Chad
Haggar & Safety Director: Mickey
Henton), is vitally important to
the success of AP&T’s safety
program in providing a safe work
environment for all employees.
Their commitment to safety is
an invaluable tool for “Building
Together Safely.”
Arne Sather, VP, Director Human Resources
25

GOALS SHARED OWNERSHIP
M
itigating health
insurance cost
increases while striving to keep
employee benefits competitive
is a continuous challenge. To
this end, a Health Savings
Account (HSA) option will be
added in 2008 as an alternative
to the fully insured medical plan.
All property and liability
insurance plans were reviewed
by a new broker, and through
diligent effort we were able to
secure improved insurance
programs at significant reductions
in premiums.
"Upon visiting most of our
Property Service Centers this
quarter, I was proud and very
pleased with the customer
service skills exhibited by our
representatives.” – Rhoda Gilbert,
Customer Service Manager
Always seeking ways to improve
customers’ experience with
AP&T, we engaged in Measure
X's Customer Service Excellence
Program. The program includes
monthly Mystery Shop calls to
each of our locations in addition
to 37 customer interviews per
month. AP&T’s emphasis on
good communication both
external and internal is evidenced
through its newly re-tooled intranet,
award winning customer
26
PHOTO: Klawock Line Crew, Prince of Wales Island
newsletter, press releases and
media requests for company
stories in trade publications.
Highlighting our efforts, was the
naming of AP&T ’s customer
newsletter “TALK” as the best
Telecom newsletter in its division
for the U.S. and Canada by the
Organization for the Promotion
and Advancement of Small
Telecommunications Companies.

COMMUNITY SERVICE
B
UILDING OUR
COMMUNITIES
The heart and soul of each
community is comprised of the
sum of those who give it life and
strength through selfless acts that
benefit others. During our 50 th
anniversary year, AP&T
employees throughout the
spectrum of our service areas
engaged with their peers in
activities to build a stronger bond
between AP&T and those we
serve. From partnering with St.
Judes for cancer research, and
support of both the Haines and
Skagway cancer walk events, to
assisting families in crisis
counseling on Prince of Wales
Island, AP&T extended a hand
of compassion and caring.
Sponsorships of local sports
teams too numerous to mention
and events such as the SE Alaska
State Fair, Alcan 200 and Prince
of Wales Island Marathon
personify the vibrant
adventurous lifestyles of our
communities. Whether hanging
Tok’s Christmas star, or providing
instructors for computer labs in
Guatemala, the benefit of
relationships built in each of
these activities far outweighs the
value expended in monetary
terms. As employee-owners we
are grateful to be in a position
to make a positive impact in the
communities we serve.
“ The heart and soul of each
community is the sum of those who
give it life and strength through
selfless acts that benefit others. “
Phyllis Sage - Customer Service Representative, Haines, Alaska
PHOTO: Beverly Olsen and Grand daughter Bonnie, Chilkat River Cancer Walk
27

BUILDING OUR LEGACY
28 PHOTO: Kasaan School Children join the digital age in partnership with AP&T.

LEGACY MILESTONES
Remembering Milestones:
Building our Legacy
In 2007, we reflected proudly
on our past in the midst of
planning for our future. For a
half-century, Alaska Power &
Telephone Company has made
a positive impact in the everyday
lives of people in our
communities. We invited friends
and neighbors to come celebrate
and help us honor our many
years of service by holding open
house celebrations at AP&T office
locations throughout the
company. The very first of these
was a frigid January day in
Skagway, our founding place,
where several local fire crewmen
out on a training maneuver broke
ranks to eat cake and sing
“Happy Anniversary!”
Wrangell’s fair weather host,
manager Doug McMurren, and
his crew broke out the BBQ for
a summer sidewalk shindig while
Craig and Petersburg finished
out the year with back-to-back
50th Anniversary Yuletide open
house events in December.
We believe AP&T founders,
Arthur and Marguerite Garrett
and Hector Munn, would be
proud of the reliable and
innovative energy and telecom
services we have come to offer
our Alaskan customers today.
PHOTO: We had our cake and ate it too! Chef Doug McMurren, Exchange Mgr., Wrangell
Though technologies have
changed; our approach to service
Happy 50 th Birthday, AP&T!
as employee-owners has not.
As those before us, we stand on
the threshold of AP&T’s next 50
years prepared to maintain and
continue building together a rich
legacy ripe for the telling in the
2057 annual report marking our
100 th year of service.
29

FINANCIALS M D A
REVENUES BY SEGMENT
ELECTRIC OPERATIONS
Chad A. Haggar, CPA
VP, Chief Financial Officer
C
ompany Overview
2007 represents an
important benchmark in the
history of Alaska Power &
Telephone. With its beginnings
in Skagway in 1957, AP&T has
been providing utility service to
rural Alaska for over 50 years.
During that time the company
has expanded its service area to
include over 30 communities
throughout the interior and
southeast Alaska. 2007 also
represents 5 years of being a
company operating under a Plan
of Reorganization. Through the
tremendous effort of the
employee owners, the company
has not only regained its financial
stability but has succeeded in
recapturing the value once lost.
While power and telephone
service represent the core
business for the company,
populations in our service areas
remain relatively stable which
32
PHOTO: Sundogs fill a Winter sky at Eagle Summit
provides little opportunity for
growth. The very nature of our
business has caused the
company to focus on both
improving its core operations
and developing non-regulated
lines of business. On the power
side, these efficiencies can be
found in our hydroelectric
operations which were
responsible for 72% of all
generation, a 10% increase over
the five year period. This
increase in hydroelectric
generation has resulted in a
reduction of 260 thousand
gallons of diesel fuel being
burned per year. For
telecommunications, reducing
data transport costs while
providing an increased level of
service is the mantra. Thus,
attention is centered on
developing a microwave data
network throughout southeast
Alaska. The SE Network will
provide a much needed increase
in bandwidth to a rural market
whose demand for this
commodity is increasing
exponentially.
Electric revenues during 2007
increased by $371 thousand or
2.2%, to $17.5 million. This
additional revenue is derived
from total kilowatt-hour sales of
66.8 million kWh, a 2.7% increase
over the previous year of which
0.5% was wholesale activity.
Over the past 5 years, electric
operations have experienced an
average annual increase of 6.3%.
1.6% of this increase can be
attributed to load growth; the
remainder comes from rate
increases.
TELECOM OPERATIONS
Regulated telephone revenues
decreased by 1.4% during 2007
to $14.3 million. However, when
2006 sales are adjusted by the
one-time payment received from
the Alaska Exchange Carriers
Association, base sales increased
by $100 thousand. During 2005,
all non-regulated activities were
separated from the
telecommunications business
segment to facilitate regulatory
filings. Since 2005, regulated
revenues have grown at an
average rate of 2.36% primarily
due to rate increases.

MANAGEMENT DISCUSSION AND ANALYSIS
OPERATING REVENUES
OTHER NON-REGULATED
OPERATIONS
Non-regulated operations
represent non-regulated
telecommunications, long
distance and engineering
services. Non-regulated
telecommunications increased
by $750 thousand or 19% due
to an increase in key system
sales, internet service and satellite
dish installation services. Long
distance service revenues fell by
2% or $9 thousand while
engineering services increased
by $280 thousand over the
previous year. Since the
separation of telecommunication
services in 2005, non-regulated
sales have increased at an
average rate of 19%.
INTERNATIONAL
OPERATIONS
Revenues from international
operations are generated from
an operations and management
contract to oversee Inversiones
Pasabien, a 12.5 megawatt
hydroelectric facility in
Guatemala. While revenues of
$416 thousand are 8.5% behind
the previous year, it is important
to note that AP&T owns a 25%
interest in the Pasabien project
and has earned an average of
$420 thousand per year in
investment income over the past
5 years.
EXPENSES BY SEGMENT
OPERATING EXPENSES -
ELECTRIC
Total operating expenses for
electric operations increased by
$320 thousand or 3% to $11
million. Electric generation cost
of power remained steady at
$3.5 million primarily due to an
11% increase in hydroelectric
generation. Non-fuel operations
and maintenance expenses
decreased 1% or $63 thousand;
however, the capitalization of
allowable costs decreased by
19% or $220 thousand causing
a net increase of $150 thousand
in overall expenses. This change
in capitalization is due to the
shift in emphasis from power
projects to the SE Network,
where operating costs are not
capitalized under GAAP
(Generally Accepted Accounting
Principles). Depreciation and
amortization expense increased
by 2.5% or $71 thousand and in
2007 to $2.9 million. The slower
accretion of a regulatory asset,
which represents future
recoverable revenues for the
Goat Lake Hydro system, further
increased overall operating
expenses in 2007 by $120
thousand.
OPERATING EXPENSES -
TELEPHONE
Combined regulated telephone
operations and maintenance
expense increased by $680
thousand or 5.8% to $12.5 million
in 2007. This increase in expense
is comprised of plant specific
expenses of $430 thousand and
an additional $230 thousand of
depreciation expense. The
upward pressure of expenses
has caused the company to
contemplate a local rate change.
OPERATING EXPENSES –
OTHER NON-REGULATED
OPERATIONS
Non-regulated operations
experienced an increase in
operating expenses of $950
thousand for 2007, an increase
of 22%. Labor and related
benefits accounted for $500
thousand of the increase with
depreciation being responsible
for another $100 thousand.
Labor and related costs increased
due to the company entering
into the satellite TV installation
line of business. The additional
depreciation is related to various
segments of the SE Network that
are now operational.
International operation and
maintenance expense remained
steady at $770 thousand during
2007.
33

MANAGEMENT DISCUSSION AND ANALYSIS
I
NVESTMENT AND OTHER
INCOME
Net other income decreased by
$315 thousand, or 25.3% to $880
thousand during 2007. This
change is due to a reduction in
equity earnings at Inversiones
Pasabien and a reduction in the
occurrence of one-time gains
and losses. Interest income
increased by 6.4% to $585
thousand in 2007 compared to
$550 thousand in 2006. Interest
expense remained steady at $4.7
million in 2007. As AP&T
continues to exceed the
performance expectations that
were established within the
company’s Plan of
Reorganization, the obligation
to its debtors is being paid off
over a shorter time frame. As
the Plan mandates the total
amount of payments to be made,
decreasing the term of the debt
results in re-imputing the amount
of interest to be recognized
during the current year. The
result is interest expense
remaining constant or slightly
increasing where conventional
wisdom would dictate that
interest expense would decrease
over time. This trend is expected
to continue over the next several
years.
PROVISION FOR INCOME
TAXES
The effective tax rate was 36.9%
in 2007 compared to 39.1% in
2006. While income before tax
decreased by 18.6% to $4.8
million during 2007, although
this represents an average
increase of 23% per year since
2003. The income tax provision
decreased to $1.8 million from
$2.3 million in 2006.
FINANCIAL CONDITION
Assets – During 2007, total
assets decreased slightly to $120.7
million from $121.6 million in
2006. The company’s cash
position, including securities,
was $5 million at the end of 2007
compared to $8 million the
previous year. The reduction in
cash was the result of investment
in new plant and settling the
company’s liabilities.
Liabilities – Interest bearing
liabilities decreased by $3.8
million to $77.7 million at the
end of 2007 with current
payables falling by an additional
$900 thousand. Overall, this
represents a reduction in longterm
debt of $16.5 million during
the first 5 years under the Plan
of Reorganization. This pay
down of debt coupled by the
increase in total equity improved
the debt to total capitalization
ratio at the end of 2007 to 73/27,
from 87/13 at the end of 2003.
Stockholder Equity – New
stock purchases along with
reinvested earnings increased
the total stockholder’s equity by
14% to $28.5 million compared
to $25 million in 2006. During
2007, 26 thousand new shares
were sold to the Employee Stock
Ownership Plan (ESOP) and
other investors. Total
outstanding shares at the end of
2007 were 1.48 million, an
increase of 1.8% from 1.45
million in 2006. Book value per
share increased by $2.04 to
$19.21, representing an average
annual increase of 16% since
2003. Total equity has increased
by $14 million during the 5 year
period.
34

MANAGEMENT DISCUSSION AND ANALYSIS
Liquidity and Capital
Resources
The Company continued to
maintain strong liquidity with
cash flow from operations and
has adequate internal resources
available to meet ongoing
operating requirements and debt
obligations. In an effort to
accelerate completion and obtain
the most value for shareholders,
management is seeking
additional funding for the SE
Network. With the additional
funding, we believe the network
will be complete and fully
operational by the summer of
2009.
Operating Activities
Cash flows from operating
activities fell by 25% from $10.7
million to $8 million during 2007.
The primary cause for the
reduction in cash flow is the
effect of the company fully
utilizing its Net Operating Loss
Carry-Forwards. As a result, cash
income taxes paid during the
year increase by $1.4 million.
The combined changes in
operating assets and liabilities
account for the remainder of the
decrease.
Investing Activities
Cash used in investing activities
during 2007 increased by 23%
to $7.7 million compared to $6.2
million in 2006. Capital
expenditures for construction of
plant increased by $180
thousand; the balance of the
change resulted from a reduction
in reimbursable construction cost
during of the year.
Financing Activities
Cash used for financing was $3.3
million in 2007 compared to $5.2
million in 2006. The repayment
of long-term debt in 2007
decreased to $3.8 million from
$5.9 million during 2006.
Proceeds from the sale of
common stock were $480
thousand in 2007 compared to
$550 thousand in 2006.
“ Through the
tremendous
effort of the
employee
owners, the
company has not
only regained its
financial stability
but has
succeeded in
recapturing the
value once lost..”
- Chad A. Haggar, CPA
VP, Chief Financial Officer
35

MANAGEMENT DISCUSSION AND ANALYSIS
ISSUES, RISKS AND
CHALLENGES
The Company’s risk profile has
not changed significantly in 2007,
but management recognizes that
there will always be risks and
challenges facing a business,
which include the effects and
uncertainties of future events,
some of which have been
identified and described below.
• The continuing unstable
economic environment in Alaska
could have a negative impact
and restrict growth opportunities
there.
• Our continued reliance
on subsidies from the
government to our regulated
electric and telecommunications
customers, that help them to pay
rates that reflect a fair return to
the Company, could be affected
by legislative or regulatory
changes..
• If the company fails to
meet the requirements outlined
in the financial projections as
presented in the Plan of
Reorganization, or fails to uphold
the financial covenants of its
Master Loan Agreement with
CoBank, events could cause a
default in the terms of the
agreements and would adversely
affect the Company’s future.
• We face risks related to
our international operations
through unexpected changes in
compliance regulations, political,
legal and economic instability,
language & cultural barriers,
seasonal factors that would affect
hydrology, currency fluctuations
and unforeseen adverse tax
consequences, all of which could
have adverse effects on the
Company’s long-term financial
projections.
Chad A. Haggar, CPA
VP, Chief Financial Officer
36
• Recently proposed
regulatory changes in the
telecommunications sector may
have negative effects on
projected results for the
Company.
Chad A. Haggar, CPA
VP, Chief Financial Officer
Michael Garrett
Exec. VP, COO-Telecom,
Treasurer
Michael Garrett
Exec. VP, COO-Telecom, Treasurer

FIVE YEAR SUMMARY
FINANCIAL SUMMARY - OPERATING RESULTS
$ in thousands
REVENUE BY SEGMENT 2003 2004 2005 2006 2007
Revenues - Electric $13,969 $14,365 $15,979 $17,133 $17,504
Revenues - Telecommunications $14,653 $15,883 $13,648 $14,495 $14,293
Revenues - Nonregulated Operations $ 1,581 $ 1,622 $ 3,917 $ 4,365 $ 5,383
Revenues - International $ 518 $ 491 $ 428 $ 455 $ 416
Total Revenues $30,722 $32,361 $33,973 $36,448 $37,596
OPERATING EXPENSES BY SEGMENT
Expenses - Electric $ 8,176 $ 8,966 $ 9,687 $ 10,681 $ 11,001
Expenses - Telecommunications $11,659 $12,627 $10,923 $ 11,821 $ 12,499
Expenses - Nonregulated Operations $ 1,585 $ 1,671 $ 3,955 $ 4,297 $ 5,253
Expenses - International $ 868 $ 794 $ 744 $ 768 $ 770
Total Operating Expenses $22,287 $24,059 $25,309 $27,567 $29,522
OPERATING INCOME BY SEGMENT
Electric Power $ 5,793 $ 5,399 $ 6,292 $ 6,452 $ 6,502
Telecommunications $ 2,995 $ 3,256 $ 2,725 $ 2,674 $ 1,795
Non-Regulated Operations $ (4) $ (49) $ (38) $ 68 $ 130
International $ (350) $ (303) $ (319) $ (319) $ (353)
Total Operating Income $ 8,434 $ 8,302 $ 8,664 $ 8,881 $ 8,074
Operating Margin 27.5% 25.7% 25.5% 24.4% 21.5%
Net Income $ 1,332 $ 2,400 $ 2,949 $ 3,557 $ 3,001
EBITDA 1 $14,260 $14,386 $14,887 $15,336 $14,901
Cash Flow from Operations $ 8,639 $ 8,969 $10,495 $10,762 $ 8,032
Earnings (loss) per Share - Basic $ 1.08 $ 1.84 $ 2.11 $ 2.48 $ 2.04
1
EBITDA is the acronym for: Earnings before Interest Taxes Depreciation and Amortization a common financial measure used to determine
a company’s cash from operating activities.
37

FIVE YEAR SUMMARY
FIVE YEAR SUMMARY - KEY RATIOS
$ in thousands
KEY RATIOS 2003 2004 2005 2006 2007
Current Ratio 1.91 2.89 2.13 1.94 2.03
Cash From Operations / Revenue 28.1% 27.7% 30.9% 29.5% 21.4%
Debt / Capitalization 86.72% 83.58% 80.72% 76.52% 73.17%
Equity/ Capitalization 13.28% 16.42% 19.28% 23.48% 26.83%
Return on Assets 1.15% 2.08% 2.47% 2.93% 2.49%
Return on Equity 9.19% 13.65% 14.10% 14.23% 10.53%
FIVE YEAR SUMMARY - OPERATING RESULTS GRAPH
$ in millions
2003 2004 2005 2006 2007
37.6
36.4
33.9
32.4
30.7
29.5
27.6
22.3
24.1
25.3
8.4
8.3
8.6
8.9
8.1
1.3
2.4
2.9
3.6
3
TOTAL REVENUE
TOTAL OPERATING EXPENSES
OPERATING INCOME
NET INCOME (LOSS)
38

FIVE YEAR SUMMARY
FIVE YEAR SUMMARY - TOTAL CAPITALIZATION
TOTAL CAPITALIZATION 2003 2004 2005 2006 2007
Equity / Capitalization 0.132784847 0.164245205 0.192821382 0.2348 0.2683
Debt / Capitalization 0.867220016 0.835751039 0.807178618 0.7652 0.7317
FIVE YEAR SUMMARY - TOTAL CAPITALIZATION GRAPH
2003 2004 2005 2006 2007
90
75
86.7%
83.6%
80.7%
76.5%
73.2%
60
45
30
15
13.3%
16.4%
19.3%
23.5%
26.8%
EQUITY / CAPITALIZATION
DEBT / CAPITALIZATION
39

FIVE YEAR SUMMARY
FIVE YEAR SUMMARY - FINANCIAL POSITON
$ in millions
FINANCIAL POSITION 2003 2004 2005 2006 2007
Total Current Assets $ 11,095 $ 13,262 $ 14,875 $ 15,773 $ 13,509
Property Plant & Equip, net $ 74,987 $ 73,576 $ 73,729 $ 75,000 $ 76,074
Total Assets $115,564 $115,598 $119,447 $121,565 $120,735
Working Capital $ 5,282 $ 8,670 $ 7,878 $ 7,640 $ 6,858
Total Current Liabilities $ 5,813 $ 4,592 $ 6,996 $ 8,132 $ 6,651
Total Debt $ 94,693 $ 89,450 $ 87,560 $ 81,485 $ 77,678
Total Equity $ 14,499 $ 17,579 $ 20,917 $ 25,007 $ 28,490
Total Capitalization $109,192 $107,029 $108,477 $106,492 $106,168
Book Value per Share - Basic $ 11.72 $ 12.86 $ 14.76 $ 17.17 $ 19.21
FIVE YEAR SUMMARY - CASH POSITON GRAPH
$ in millions
2003 2004 2005 2006 2007
12.5
$10,495
$10,762
10
7.5
$8,639
$8,969
$8,670
$6,251
$7,878
$7,735
$8,013
$7,640
$8,032
$6,858
5
$5,282
$4,883
$5,004
2.5
CASH FLOW
WORKING CAPITAL
CASH & SECURITIES FOR SALE
40

FIVE YEAR SUMMARY
FIVE YEAR SUMMARY - COMMON STOCK GRAPH
$ in millions
2003 2004 2005 2006 2007
$21.30
TBD
$19.21
$17.17
$15.00
$14.76
$11.72
$12.86
$10.65
$6.95
$1.08
$1.84
$2.11
$2.48
$2.04
BOOK VALUE PER SHARE
SHARE PRICE (PER VALUATION)
EARNINGS (LOSS) PER SHARE
41