The state agency that owns the shipyard in Ketchikan has notified Vigor Alaska, which operates the facility, that the state does not intend to renew the company's lease when it expires in November. Though the agency is talking with Vigor, it also is preparing to advertise for a new operator.
Vigor Alaska, the private operator of the state-owned Ketchikan Shipyard, has been notified that the state will not extend the shipyard operating agreement with the company when the current contract expires in November.
Citing less-than-full utilization of the shipyard and increasing unfunded maintenance at the facility under Vigor's management, the Alaska Industrial Development and Export Authority (AIDEA), which owns the facility, said in a Feb. 28 letter that it would give the company until Nov. 30 - or perhaps through March 1, 2026 - to wind down its operations and vacate the site.
AIDEA said it will issue a request by early April to look for possible new operators for the facility, which handles much of the work on Alaska's state ferry fleet.
Two weeks after the notification letter, the state agency and Vigor issued a joint statement on March 13 that they have "commenced discussions this week to ensure the Ketchikan Shipyard remains operational."
The four-paragraph statement added, "Both parties are discussing ways to extend our working relationship and operations at the shipyard beyond 2025."
The Feb. 28 letter to Vigor announced that AIDEA had decided not to implement a 10-year extension under the operating agreement, the agency's Executive Director Randy Ruaro wrote.
"After reviewing Vigor's long term-economic performance projections, extensive studies, repair budgets and other documentation relating to the shipyard, AIDEA has reasonably determined that Vigor has not demonstrated its ability to fully utilize all of the shipyard's economic capabilities."
In addition, Ruaro wrote, Vigor's contributions to the repair and replacement account are inadequate to maintain the facility in good condition.
Though the current agreement expires Nov. 30, Ruaro wrote that the agency "is willing to discuss a plan for wind-down and demobilization of up to one year through March 1, 2026."
Vigor was reviewing the assertions made in the AIDEA letter and reviewing its options, company spokesman Benton Strong wrote in an email reply to the Ketchikan Daily News.
"(We) did not anticipate this action from AIDEA," Strong wrote.
"AIDEA's unexpected announcement impacts nearly 100 family-wage jobs in Ketchikan, with no clear understanding of who might take over or whether the facility will even continue to operate as a shipyard," according to the company's statement.
The agency expects Vigor "to keep its word and perform several months of work already under contract" for the Alaska Marine Highway System, Alaska Department Safety and others, Ruaro told the Ketchikan Daily News last week.
Ketchikan Gateway Borough Manager Ruben Duran reported to the borough assembly last week that one of the Ketchikan airport ferries was due for work at the shipyard drydock in April, "but Vigor is not accepting new contracts."
If Vigor declines the work, "the nearest U.S. facility capable of servicing the ferries is in Bellingham, Washington," Duran wrote. "However, sending a ferry there annually would place a heavy financial and operational burden on the airport, including travel time, fuel costs and the need for licensed crew. Sending the ferries out-of-state for drydock services is not sustainable long term."
Originally owned by the Alaska Department of Transportation, the shipbuilding and repair facility got its start in the 1980s with a single floating drydock at the site next to the Alaska Marine Highway System ferry terminal in Ketchikan.
The state spent $30 million building the facility.
After a period of operational instability, the Ketchikan-based firm Alaska Ship and Drydock began operating the facility, which was expanded over time to include a second drydock and an assembly building.
The operating agreement between AIDEA and Alaska Ship and Drydock was renegotiated in 2005 with a 10-year term and the potential for two 10-year extensions, according to AIDEA.
The state agency in 2012 approved the sale of Alaska Ship and Drydock to Vigor Alaska, a subsidiary of the Vigor Industrial firm that operates several facilities in the Pacific Northwest.
AIDEA approved the first 10-year operating agreement extension in 2015, with the possibility of a second 10-year extension this year.
However, Ruaro's letter of Feb. 28 made it clear that AIDEA does not believe that Vigor has performed well enough to allow for an extension. That includes revenue and workforce measures.
"Vigor's total revenue at the Ketchikan shipyard has decreased substantially over the current term of the operating agreement from 2015 to 2025," Ruaro wrote. "Likewise, average annual (employee) headcount has trended downward over that time period. These are significant indicators that the shipyard is not working at its full economic capabilities."
AIDEA also takes issue with the shipyard's poor financial performance, according to the letter. The agency said it has seen a payment in only two of the nine years that a profit-sharing agreement has been in place, despite what Ruaro called "significant tax and utility subsidies."
Vigor built two Alaska state ferries, the Tazlina and the Hubbard, about a decade ago. Though the state has not built a new ferry since then, Vigor has performed repairs and maintenance to the Alaska Marine Highway System fleet every year, and picked up some work on federal and private vessels.
According to the agency's letter, the next step is for AIDEA and Vigor to "work cooperatively on the demobilization and wind-down of Vigor's operation at the shipyard while ensuring the work scheduled during that period is appropriately accommodated."
City of Ketchikan Mayor Bob Sivertsen said he was not surprised by the AIDEA letter.
"I think this has been discussed in the past numerous times about getting that shipyard busier and making sure it's in good shape," Silverstein said. "Those conversations have been going on for years."
Vigor Industrial, the parent company of Vigor Alaska, has itself undergone ownership changes in recent years.
In 2019, Vigor Industrial was acquired by The Carlyle Group and Stellex Capital Management investment firms. In 2023, Vigor Industrial was sold to an affiliate of the private-equity firm Lone State Funds.
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