UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                  FORM U-3A2/A

                               December 31, 2002

Statement  by Holding  Company  Claiming  Exemption  under Rule  U-3a-2 from the
provisions of the Public Utility Holding Company Act of 1935


ALASKA POWER & TELEPHONE COMPANY
--------------------------------------------------------------------------------
(Name of Company)

hereby files with the Securities Exchange Commission, pursuant to Rule 2, its
statement claiming exemption as a holding company from the provisions of the
Public Utility Holding Company Act of 1935, and submits the following
information:

1.     Name, State of organization, location and nature of business of claimant
       and every subsidiary thereof, other than any exempt wholesale generator
       (EWG) or foreign utility company in which claimant directly or indirectly
       holds an interest.

2.     A brief description of the properties of claimant and each of its
       subsidiary public utility companies used for the generation,
       transmission, and distribution of electric energy for sale, or for the
       production, transmission and distribution of natural or manufactured gas,
       indicating the location of principal generating plants, transmission
       lines, producing fields, gas manufacturing plants, and electric and gas
       distribution facilities, including all such properties which are outside
       the State in which claimant and its subsidiaries are organized and all
       transmission or pipelines which deliver or receive electric energy or gas
       at the borders of such State.

3.     The following information for the last calendar year with respect to
       claimant and each of its subsidiary public utility companies:

       (a) Number of kWh. Of electric energy sold (at retail or wholesale) and
           Mcf. Of natural or manufactured gas distributed at retail.

       (b) Number of kWh. of electric energy and Mfc. Of natural or manufactured
           gas distributed at retail outside the State in which each company is
           organized.

       (c) Number of kWh. Of electric energy and MCF. OF NATURAL OR MANUFACTURED
           AS SOLD AT WHOLESALE OUTSIDE THE State in which each such company is
           organized, or at the State line.

       (d) Number of kWh. Of electric energy and Mcf. Of natural or manufactured
           gas purchased outside the State in which each such company is
           organized or at the State line.

4.     The following information for the reporting period with respect to
       claimant and each interest it holds directly or indirectly in an EWG or a
       foreign utility company, stating monetary amounts in United States
       dollars:



       (a) Name, location, business address and description of the facilities
           used by the EWG or foreign utility company for the generation,
           transmission and distribution of electric energy for sale or for the
           distribution at retail of natural or manufactured gas.

       (b) Name of each system company that holds an interest in such EWG or
           foreign utility company; and description of the interest held.

       (c) Type and amount of capital invested, directly or indirectly, by the
           holding company claiming exemption; any direct or indirect guarantee
           of the security of the EWG or foreign utility company by the holding
           company claiming exemption; and any debt or other financial
           obligation for which there is recourse, directly or indirectly, to
           the holding company claiming exemption or another system company,
           other than the EWG or foreign utility company.

Potential persons who are to respond to the collection of information contained
in this form are not  required to respond  unless the form  displays a currently
valid OMB control number. SEC 1834 (2-97)

       (d) Capitalization and earnings of the EWG or foreign utility company
           during the reporting period.

       (e) Identify any service, sales or construction contract(s) between
           the EWG or foreign utility company and a system company, and describe
           the services to be rendered or goods sold and fees or revenues under
           such agreement(s).

EXHIBIT A

ALASKA POWER & TELEPHONE COMPANY
--------------------------------------------------------------------------------
 Name of claimant

                                                        By    Russell A. Smith
                                                              ------------------
                                                        (title)       VP/CFO
                                                                  --------------

CORPORATE SEAL

Attest:      ROBERT S. GRIMM,   PRESIDENT
             ----------------------------


Name,  title,  and  address  of  officer  to  whom  notices  and  correspondence
concerning this statement should be addressed:


ALASKA POWER & TELEPHONE COMPANY                   RUSSELL A. SMITH, VP/CFO
--------------------------------                --------------------------------
          (Name)                                             (Title)
P.O. BOX 3222, PORT TOWNSEND, WASHINGTON   98368



EXHIBIT B















                        Alaska Power & Telephone Company
                                and Subsidiaries

                        Consolidated Financial Statements

                     Years Ended December 31, 2002 and 2001
                       with Report of Independent Auditors







































                Alaska Power & Telephone Company and Subsidiaries

                        Consolidated Financial Statements


                     Years Ended December 31, 2002 and 2001




                                    CONTENTS


Report of Independent Auditors.............................................   1


Audited Consolidated Financial Statements

     Consolidated Balance Sheets...........................................   2
     Consolidated Statements of Income.....................................   4
     Consolidated Statements of Stockholders' Equity.......................   6
     Consolidated Statements of Cash Flows.................................   7
     Notes to Consolidated Financial Statements............................   8










































                         Report of Independent Auditors



The Board of Directors
Alaska Power & Telephone Company

We have  audited  the  accompanying  balance  sheet of Alaska  Power & Telephone
Company  as of  December  31,  2002 and the  related  statements  of income  and
retained  earnings  and cash  flows for the year  then  ended.  These  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audit. The accompanying balance sheet of Alaska Power & Telephone Company as
of December 31, 2001 and the related  statements of income and retained earnings
and cash  flows for the year then ended were  audited  by other  auditors  whose
report dated March 1, 2002 expressed an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain  reasonable  assurance  about  whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.   We  believe  that  our  audit  provides  a
reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all  material  respects,  the  financial  position  of Alaska  Power & Telephone
Company at  December  31, 2002 and the  results of its  operations  and its cash
flows  for the  year  then  ended,  in  conformity  with  accounting  principles
generally accepted in the United States of America.



Spokane, Washington
March 19, 2003,  except for Note 2 and Note 8
as to which the date is August 18, 2003.















                                                                               1

                Alaska Power & Telephone Company and Subsidiaries

                           Consolidated Balance Sheets


                                                                      -------------------------------------
                                                                                   DECEMBER 31
                                                                             2002              2001
                                                                      -------------------------------------
                                                                                     
ASSETS

PROPERTY, PLANT AND EQUIPMENT
   Electric                                                              $ 77,348,649      $ 73,430,746
   Telecommunications                                                      38,211,574        33,466,191
   Non-utility                                                              1,444,872         5,078,218
                                                                      -------------------------------------
                                                                          117,005,095       111,975,155

   Less accumulated depreciation                                           38,801,746        34,426,701
                                                                      -------------------------------------
                                                                           78,203,349        77,548,454
   Utility plant under construction                                         1,173,185         2,144,018
-----------------------------------------------------------------------------------------------------------
                           Total property, plant and equipment, net        79,376,534        79,692,472
-----------------------------------------------------------------------------------------------------------

OTHER ASSETS
   Preliminary survey and investigation costs                                 640,299         1,865,144
   Investments (See Note 6)                                                 5,519,202         7,352,746
   Goodwill - net of accumulated amortization                               9,266,403         9,266,403
   Notes receivable - Summit Alaska (See Note 6)                                    -         6,390,568
   Rate stabilization asset (See Note 7)                                    1,666,127         1,215,888
   Special Funds - Restricted  (See Note 8)                                 6,545,587         6,477,231
   Other assets - net of amortization                                       3,801,324         1,508,772
-----------------------------------------------------------------------------------------------------------
                                                 Total other assets        27,438,942        34,076,752
-----------------------------------------------------------------------------------------------------------

CURRENT ASSETS
   Cash                                                                    1,063,893            401,798
   Receivables, less allowance for
      doubtful accounts of $22,503 in 2002, and
     $27,977 in 2001                                                       5,073,328          4,977,256
   Inventory and other current assets                                      1,520,048          1,694,480
   Deferred income taxes  (See Note 10)                                      116,006            135,333
   Income taxes recoverable                                                  521,727            924,663
-----------------------------------------------------------------------------------------------------------
                                               Total current assets        8,295,002          8,133,530
-----------------------------------------------------------------------------------------------------------

                                                                        $115,110,478       $121,902,754
                                                                      =====================================





See accompanying notes.                                                        2

                Alaska Power & Telephone Company and Subsidiaries

                           Consolidated Balance Sheets



                                                                      --------------------------------------
                                                                                  DECEMBER 31
                                                                            2002               2001
                                                                      --------------------------------------
                                                                                    
LIABILITIES AND STOCKHOLDERS' EQUITY

STOCKHOLDERS' EQUITY Common stock, $1 par value:
     Authorized shares - 2,000,000
     Issued and outstanding shares - 1,222,965 in 2002,                 $   1,222,965     $   1,239,717
       and 1,239,717 in 2001
   Additional paid-in capital                                               6,416,593         6,869,345
   Retained earnings                                                        5,519,872        14,754,559
------------------------------------------------------------------------------------------------------------
                                         Total stockholders' equity        13,159,430        22,863,621
------------------------------------------------------------------------------------------------------------

LONG-TERM DEBT, LESS CURRENT PORTION  (See Note 8)
   Goat Lake Hydro, Inc. note payable                                      21,371,819        21,700,989
   Other term debt                                                         55,056,637        59,379,245
   Liabilities subject to compromise (See Note 2)                          16,637,634                 -
------------------------------------------------------------------------------------------------------------
                                               Total long-term debt        93,066,090        81,080,234
------------------------------------------------------------------------------------------------------------

OTHER LIABILITIES
   Deferred income taxes  (See Note 10)                                     2,318,010         8,339,186
   Customer deposits and other                                                346,098           264,774
------------------------------------------------------------------------------------------------------------
                                            Total other liabilities         2,664,108         8,603,960
------------------------------------------------------------------------------------------------------------

CURRENT LIABILITIES
   Accounts payable                                                         1,955,707         2,287,963
   Lines of credit  (See Note 8)                                                    -         4,000,000
   Short term notes payable                                                 1,055,097                 -
   Current portion of long-term debt                                        3,210,046         3,066,976
------------------------------------------------------------------------------------------------------------
                                          Total current liabilities         6,220,850         9,354,939
------------------------------------------------------------------------------------------------------------

                                                                         $115,110,478      $121,902,754
                                                                      ======================================









See accompanying notes.                                                        3

                Alaska Power & Telephone Company and Subsidiaries

                        Consolidated Statements of Income



                                                                      -------------------------------------
                                                                             YEAR ENDED DECEMBER 31
                                                                             2002              2001
                                                                      -------------------------------------
                                                                                     
REVENUES
   Electric                                                              $ 12,822,645      $ 12,949,959
   Telecommunications                                                      14,008,371        13,850,206
   Non-regulated telecommunications                                         1,570,350         1,345,294
-----------------------------------------------------------------------------------------------------------
Total revenues                                                             28,401,366        28,145,459
-----------------------------------------------------------------------------------------------------------

OPERATING EXPENSES
   Electric                                                                 6,230,757         6,250,406
   Telecommunications                                                      10,132,113         9,066,500
   Non-regulated telecommunications                                         1,391,902         1,484,167
                                                                      -------------------------------------
                              Operations and maintenance expense           17,754,772        16,801,073

   Depreciation and amortization expense                                    5,287,225         5,224,803
-----------------------------------------------------------------------------------------------------------
Income from telecommunications and electric operations                      5,359,369         6,119,583
-----------------------------------------------------------------------------------------------------------

OTHER INCOME (EXPENSE)
   Equity in earnings from investments                                        629,789           399,434
   Costs related to investments                                              (806,812)         (198,060)
   Loss from sale of assets                                                   (26,081)         (113,479)
   Loss from impaired assets (See Note 6)                                  (1,997,975)         (203,569)
   Miscellaneous                                                                8,528           (59,521)
                                                                      -------------------------------------
                                       Total other income (expense)        (2,192,551)         (175,195)
                                                                      -------------------------------------

   Interest income                                                            278,501           652,038
   Interest expense                                                        (4,220,994)       (4,449,052)
                                                                      -------------------------------------
                                             Net interest (expense)        (3,942,493)       (3,797,014)
-----------------------------------------------------------------------------------------------------------
                           Income (loss) from continuing operations          (775,675)        2,147,374
-----------------------------------------------------------------------------------------------------------

   Losses related to Summit Alaska (See Note 2)                           (26,970,411)                -
   Other reorganization expense (See Note 2)                                 (557,587)                -
   Gain from extinguishment of debt (See Note 2)                           15,651,973                 -
-----------------------------------------------------------------------------------------------------------
       Income (loss) before tax and discontinued operations               (12,651,700)        2,147,374
-----------------------------------------------------------------------------------------------------------



See accompanying notes.                                                        4

                Alaska Power & Telephone Company and Subsidiaries

                  Consolidated Statements of Income (continued)


                                                                      -------------------------------------
                                                                            YEAR ENDED DECEMBER 31
                                                                            2002              2001
                                                                      -------------------------------------
                                                                                    
Provision for income tax benefit (expense)                             $  4,981,728       $   (617,019)

-----------------------------------------------------------------------------------------------------------
      NET INCOME (LOSS) BEFORE DISCONTINUED OPERATIONS                   (7,669,972)         1,530,355
-----------------------------------------------------------------------------------------------------------

Income (loss) from discontinued operations net of
    income tax  (See Note 14)                                            (1,339,157)            41,237
                                                                      -------------------------------------

                                                   NET INCOME (LOSS)   $ (9,009,129)      $  1,571,592
                                                                      =====================================


BASIC EARNINGS (LOSS) PER SHARE
                                    Before discontinued operations        $   (6.23)           $  1.36

                                      From discontinued operations        $   (1.09)           $  (.08)
                                                                      -------------------------------------

Total                                                                     $   (7.32)           $  1.28
                                                                      =====================================


DILUTED EARNINGS (LOSS) PER SHARE
                                     Before discontinued operations       $   (6.23)           $  1.33

                                      From discontinued operations        $   (1.09)           $  (.08)
                                                                      -------------------------------------

Total                                                                     $   (7.32)           $  1.25
                                                                      =====================================
















See accompanying notes.                                                        5

                Alaska Power & Telephone Company and Subsidiaries

                 Consolidated Statements of Stockholders' Equity




                                                ---------------------------------------------------------------------
                                                                   ADDITIONAL         RETAINED
                                                  COMMON STOCK   PAID-IN CAPITAL      EARNINGS            TOTAL
                                                ---------------------------------------------------------------------
                                                                                          
BALANCE AT JANUARY 1, 2001                        $ 1,210,288      $ 6,160,221      $ 14,153,795      $ 21,524,304

   Net income                                               -                -         1,571,592         1,571,592

   Cash dividends declared                                  -                -          (970,828)         (970,828)

   Sale of common stock to ESOP                        31,705          792,625                 -           824,330

   Sale of common stock                                 2,043           50,984                 -            53,027

   Repurchase of common stock                          (7,119)        (177,975)                -          (185,094)

   Common stock options exercised                       2,800           43,490                 -            46,290
                                                ---------------------------------------------------------------------

BALANCE AT DECEMBER 31, 2001                        1,239,717        6,869,345        14,754,559        22,863,621

   Net loss                                                 -                -        (9,009,129)       (9,009,129)

   Cash dividends declared                                  -                -          (225,558)         (225,558)

   Repurchase of stock from ESOP - net                   (127)         (39,412)                -           (39,539)

   Sale of common stock                                     -                -                 -                 -

   Repurchase of common stock                         (16,625)        (413,340)                -          (429,965)

   Common stock options exercised                           -                -                 -                 -
                                                ---------------------------------------------------------------------

BALANCE AT DECEMBER 31, 2002                      $ 1,222,965      $ 6,416,593      $  5,519,872      $ 13,159,430
                                                =====================================================================














See accompanying notes.                                                        6

                Alaska Power & Telephone Company and Subsidiaries

                      Consolidated Statements of Cash Flows


                                                                      -------------------------------------
                                                                               YEAR ENDED DECEMBER 31
                                                                               2002              2001
                                                                      -------------------------------------
                                                                                      
OPERATING ACTIVITIES
Net income / (loss)                                                        $ (9,009,129)    $ 1,571,592
Adjustments to reconcile net income (loss) to net cash
   provided by operating activities:
     Depreciation and amortization                                            5,677,256       5,475,438
     Provision for restructuring charges                                     19,141,398               -
     Forgiveness of debt due to reorganization                              (15,651,973)              -
     Loss from sale and disposal of investments                               8,460,976         113,479
     Equity in earnings of investments                                           58,383        (410,194)
     Deferred income tax provision                                           (5,855,431)      1,340,441
     Accretion of rate stabilization asset                                     (450,239)       (455,170)
Changes in operating activities:
     Receivables                                                                (96,072)       (186,280)
     Income taxes recoverable                                                   256,518        (562,841)
     Other assets and liabilities                                               427,363        (173,716)
-----------------------------------------------------------------------------------------------------------
                          Net cash provided by operating activities           2,959,050       6,712,749
-----------------------------------------------------------------------------------------------------------
 INVESTING ACTIVITIES
   Acquisitions of property, plant and equipment                             (5,361,318)    (10,558,861)
   Acquisition of stock in equity investments                                         -      (2,336,483)
   Increase in receivables from Summit Alaska                                         -      (6,390,568)
   Change in other assets                                                      (848,407)        (13,986)
   Change in preliminary survey and investigation costs                       1,224,845        (888,098)
-----------------------------------------------------------------------------------------------------------
                              Net cash used in investing activities          (4,984,880)    (20,187,996)
-----------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
   Proceeds from long-term debt                                               7,480,636      30,462,878
   Payments on long-term debt                                                (4,029,293)    (17,136,535)
   Proceeds from special funds - restricted                                     (68,356)        275,873
   Payment of cash dividends                                                   (225,558)       (727,342)
   Proceeds from sale of common stock                                                 -         923,647
   Repurchase of common stock                                                  (469,504)       (185,094)
-----------------------------------------------------------------------------------------------------------
                          Net cash provided by financing activities           2,687,925      13,613,427
-----------------------------------------------------------------------------------------------------------

                                               Net increase in cash             662,095         138,180

                                          CASH AT BEGINNING OF YEAR             401,798         263,618
                                                                      -------------------------------------
                                                CASH AT END OF YEAR        $  1,063,893   $     401,798
                                                                      =====================================
NON-CASH INVESTING ACTIVITIES
   Transfer of receivables from investment in KEC                          $          -   $     468,500
   Transfer of receivables from GTE to Goodwill                            $          -   $     330,210
                                                                      =====================================


See accompanying notes.                                                        7

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002

1.  PETITION FOR RELIEF UNDER CHAPTER 11

On December 18,  2002,  Alaska  Power & Telephone  Company (the Debtor)  filed a
petition  for relief  under  Chapter 11 of the  federal  bankruptcy  laws in the
United  States  Bankruptcy  Court for the  Western  District  of  Washington  in
Seattle. The wholly owned subsidiaries of Alaska Power & Telephone Co. have been
excluded from the Chapter 11 filings.  Since the petition  date,  the Debtor has
continued  in  possession  of its  respective  properties  and has  operated and
managed its business as debtor-in-possession  pursuant to Sections 1107 and 1108
of the Bankruptcy Code.

Under bankruptcy law, actions by creditors to collect amounts owed by the Debtor
at the filing date are stayed and other pre-petition contractual obligations may
not be  enforced  against the  Debtor,  without  approval by the Court to settle
these  claims.  Additional  claims  may  arise  subsequent  to the  filing  date
resulting from rejection of executory contracts,  including leases, and from the
determination  by the Court (or  agreed to by parties  in  interest)  of allowed
claims for contingencies,  guarantees and other disputed amounts. Secured claims
against the Debtor's assets are also stayed, although the holders of such claims
have the right to move the court for relief  from the stay.  Secured  claims are
secured  primarily by liens on the  property,  plant and equipment of the Debtor
and all of its wholly owned  subsidiaries as guarantors,  including the revenues
and  accounts  receivable  of the  subsidiaries.  The amounts of claims filed by
creditors could be significantly different from recorded amounts.

The Debtor has received  approval from the Bankruptcy  Court to pay or otherwise
honor  certain  of  its  pre-petition  obligations,  including  employee  wages,
benefits,  reimbursements  and vendor payments  related to the operations of its
subsidiaries. The Court has authorized the Debtor to operate its cash management
systems  substantially as they were operated prior to the Chapter 11 filing.  In
addition,  a Cash Collateral  Agreement was authorized by the Court allowing the
Debtor continued use of the secured  creditors'  collateral for working capital.
Due to the Debtor's  current  financial  condition,  financing  arrangements and
capital  structure,  the Debtor cannot obtain  unsecured  credit allowable under
Bankruptcy Code section 503(b)(1) as an administrative  expense.  Financing on a
post-petition  basis is  available  only  under  the terms set forth in the Cash
Collateral Agreement.

The Chapter 11 case was commenced by the Debtor primarily because of the failure
of its  investment in Summit  Alaska,  Inc.  (Summit).  Summit was a diversified
civil construction contractor located in Anchorage Alaska and was engaged in the
manufacture of aggregate,  asphalt and other gravel-based construction products.
On December 13, 2002, Summit filed a petition for liquidation under Chapter 7 of
the  federal  bankruptcy  laws in the  United  States  Bankruptcy  Court for the
District of Alaska in Anchorage. The Debtor acquired a 39% interest in Summit in
March 2001 and accounted for this  investment  using the equity  method.  Due to
recurring  operating  losses,  the Debtor  advanced  in excess of $10 million to
Summit  and  guaranteed  virtually  all debt  obligations  incurred  by  Summit.
Management  estimates  total losses to the Debtor  related to its  investment in
Summit are approximately $27 million.


                                                                               8

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002




2.  RECENTLY COMPLETED PROCEEDINGS UNDER CHAPTER 11

The Debtor filed its proposed Chapter 11 plan of  reorganization on June 9, 2003
and its disclosure  statement in support of its plan of  reorganization  on June
11, 2003.  Subsequently,  the Company  continued to operate its  businesses as a
debtor-in-possession   pursuant  to  Chapter  11  of  the  Bankruptcy  Code  and
concentrated its efforts on emerging from Chapter 11 as quickly as possible.

In its plan of reorganization, the Debtor classified the claims of its creditors
and interests of its equity  security  holders and provided for the treatment of
such claims and interests.  Under the Bankruptcy Code, various classes of claims
and  interests  were entitled to vote on whether to accept or reject the plan of
reorganization.  On July 9, 2003, the Debtor filed it's Debtor's  Second Amended
and Restated  Chapter 11 Plan of  Reorganization,  as Modified  (the "Plan") and
Debtor's Second Amended and Restated Disclosure  Statement in Support of Chapter
11 Plan of Reorganization, as Modified (the "Disclosure Statement"). On July 14,
2003,  the Court issued an order  approving the Modified Plan of  Reorganization
and Disclosure  Statement,  and  authorizing  the ballots to be  disseminated to
creditors and equity security holders and scheduled a hearing on confirmation of
the Plan for August 1, 2003.

As the date of the  confirmation  hearing  approached,  the  Debtor  engaged  in
further  negotiations  with  objecting  creditors in an effort to resolve  their
objections  to the  Plan.  By July 29,  2003,  most of the  objections  had been
resolved  and the  Debtor  filed  a  modification  of the  Plan  reflecting  the
resolution of those  objections.  As of July 30, 2003,  the principal  remaining
objection was the  objection of Puget Sound Energy,  Inc.  (PSE).  However,  the
Debtor  reached  agreement  with PSE  shortly  before  the  commencement  of the
confirmation  hearing.  Under the agreement,  PSE withdrew its objections to the
Plan, and changed its rejection to acceptance of the Plan.

The hearing on  confirmation  of the Plan,  took place on August 1, 2003. At the
close of the hearing,  the Court  issued its Order  Confirming  Debtor's  Second
Amended  and  Restated  Chapter  11  Plan  of  Reorganization,  and  issued  the
"Confirmation  Order". The Confirmed Plan of Reorganization  became effective on
August 18, 2003.

In accordance with the Confirmed Plan of Reorganization, each existing holder of
Common Stock  retained  their  ownership  equal to 100% of the shares which they
previously  held.  No issuance of  additional  shares took place.  Therefore the
existing  shareholders  own an aggregate of 1,222,965  shares  representing  the
total number of shares of common stock outstanding after affecting the Confirmed
Plan of Reorganization.






                                                                               9

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002



2.  RECENTLY COMPLETED PROCEEDINGS UNDER CHAPTER 11 (CONTINUED)

While in Chapter 11 under the U.S. Bankruptcy Code, Alaska Power & Telephone Co.
(the  Company)  applied the  provisions  of SOP 90-7,  "Financial  Reporting  by
Entities  in  Reorganization   Under  the  Bankruptcy  Code",   which  does  not
significantly change the application of accounting principles generally accepted
in the United States, however, it does require that the financial statements for
periods  including  and  subsequent  to the  Chapter 11  bankruptcy  distinguish
transactions  and events that are directly  associated  with the  reorganization
from those that result from ongoing  operations of the  business.  In accordance
with SOP 90-7, the Company had classified  liabilities incurred  pre-petition as
liabilities  subject to  compromise.  At December  31, 2002,  these  liabilities
totaled  $32,289,607.  Prior to the issuance of the  financial  statements,  the
Court confirmed the Company's Plan of  Reorganization  and  consequently,  these
liabilities  have been restated at the present values of amounts  expected to be
paid pursuant to the Confirmed Plan. The restated amount of liabilities  subject
to  compromise  net of a gain relating to the early  extinguishment  of debt was
$16,637,634  as of December  31, 2002.  The  following  summarizes  the restated
obligations resulting from the confirmed Plan of Reorganization:


         Discounted unsecured debt           $ 14,551,023
         Reclassified long-term debt            1,599,514
         Priority claims                          487,097
         Gain on extinguishment of debt        15,651,973
                                               ----------
                                             $ 32,289,607


Currently,  the  Company is working to resolve  any  remaining  open  bankruptcy
claims.  Settlement  of  these  claims  will  not  result  in the  execution  of
additional debt  agreements  pursuant to the provisions of the Confirmed Plan of
Reorganization.  See Note 8 for a description of the debt  agreements  that have
been  executed  as  settlement  of  certain  bankruptcy  claims.  The  Company's
restructured secured and unsecured debt, as well as assumed leases and executory
contracts,  will require substantial  payments over extended future periods. The
Company's  future  success  will depend,  in part,  on its ability to meet these
payment obligations. As in any projection of future events there is no assurance
that the Company will be able to do so.

In accordance with SOP 90-7, the Company has segregated  various  reorganization
items  representing  amounts incurred as a result of the Chapter 11 proceedings.
The  following  table  summarizes  the  reorganization  charges  recorded by the
Company during the year ended December 31, 2002.






                                                                              10

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002



2.  RECENTLY COMPLETED PROCEEDINGS UNDER CHAPTER 11 (CONTINUED)



Summit Alaska obligations guaranteed by Alaska Power & Telephone Co.

                                                                     
   Unsecured Nonpriority Claim - U.S. Bancorp Equipment Finance         $       300,000
   Unsecured Nonpriority Claim - National Cooperative Bank              $     1,100,000
   Unsecured Nonpriority Claim - Wells Fargo Bank                             6,707,867
   Unsecured Nonpriority Claim - Travelers Casualty & Surety                  5,650,040
   Unsecured Nonpriority Claim - General Electric Capital Corp                5,125,904
Investment in Summit Alaska                                                   1,399,990
Receivables due from Summit Alaska                                            6,986,610
                                                                            -----------
      Total losses related to Summit Alaska                                  26,970,411

Other reorganization expense, e.g. Legal, Consulting and Other                  557,587
                                                                        ---------------
                                                                        $    27,527,998
                                                                        ===============


Additionally, on the Petition Date, the Company stopped accruing interest on all
unsecured  pre-petition  debt in accordance with SOP 90-7. With the confirmation
of the Plan of  Reorganization,  the Company will make  regular  payments on all
debt pursuant to the Confirmed Plan.


3.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Alaska Power & Telephone  Company and subsidiaries  (AP&T) supplies electric and
telephone service to several communities in the state of Alaska. AP&T is subject
to  regulation  by the  Regulatory  Commission  of  Alaska  (RCA),  the  Federal
Communications  Commission,  and the Federal Energy  Regulatory  Commission (the
Commissions) with respect to rates for service and maintenance of its accounting
records.  AP&T's accounting  policies conform to generally  accepted  accounting
principles as applied to regulated  public  utilities and are in accordance with
the accounting requirements and rate-making practices of the Commissions.

    CONSOLIDATION

The accompanying  consolidated financial statements include the accounts of AP&T
and its wholly owned subsidiaries, after elimination of significant Intercompany
transactions  and  balances.  The  equity  method  of  accounting  is  used  for
investments in which the company has significant  influence.  This is defined as
ownership of at least 20% and not more than 50%.



                                                                              11

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


3.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     REVENUE AND COST RECOGNITION

The Company  recognizes  revenues  from  fixed-price  and  modified  fixed-price
construction contracts on the  percentage-of-completion  method, measured by the
percentage of cost incurred to date to estimated  total cost for each  contract.
This  method is used  because  management  considers  total  cost to be the best
available   measure  of  progress  on  these  contracts.   Because  of  inherent
uncertainties in estimating  costs and percentage of completion,  actual results
could differ from those estimates.

     CASH EQUIVALENTS

All highly liquid  investments  with original  maturities of 90 days or less are
carried at cost plus accrued  interest,  which  approximates fair value, and are
considered to be cash  equivalents.  All other  investments not considered to be
cash equivalents are separately categorized as investments.

     CONCENTRATION OF CREDIT RISK

At various  times  throughout  the year,  the cash  balances  deposited in local
institutions  exceed federally  insured limits. A possible loss exists for those
amounts in excess of $100,000.  AP&T minimizes  this risk by utilizing  numerous
financial institutions for deposits of cash funds.

     VALUATION OF ACCOUNTS RECEIVABLE

An estimate  of  collectibility  of  accounts  receivable  is made  annually.  A
provision  for  uncollectible  accounts  is accrued  based  upon this  estimate.
Specific  accounts are charged against this provision when it is determined that
the account will not be collected.

     PROPERTY, PLANT, EQUIPMENT AND DEPRECIATION

The  cost  of  additions  to  and   replacements  of  plant  and  equipment  are
capitalized. Cost includes direct material, labor, and similar items and charges
for such indirect costs as engineering,  supervision, payroll taxes, and pension
benefits. AP&T capitalizes,  as an additional cost of electric utility plant, an
allowance  for funds used during  construction  (AFUDC),  which  represents  the
allowed  cost of  capital  used to  finance a portion  of  construction  work in
progress for projects of more than one year in duration.  AFUDC consists of debt
and equity components that, when capitalized,  are credited as non-cash items to
other income and interest  charges.  The cost of current repairs and maintenance
is charged to expense, while the cost of betterment is capitalized. The original
cost of property and plant  together with removal cost,  less salvage is charged
to accumulated depreciation at such




                                                                              12

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


3.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

times as assets are retired and removed from service.  For  financial  statement
purposes, depreciation is computed on the straight-line method using rates based
on average service lives.  For income tax purposes,  AP&T computes  depreciation
using accelerated methods where permitted.

     GOODWILL

On January  1, 2002,  the  Company  adopted  SFAS No.  142,  Goodwill  and Other
Intangible Assets.  Under the new rules,  goodwill (and intangible assets deemed
to have  indefinite  lives) will no longer be amortized but is subject to annual
impairment tests in accordance with the Statement.  Other intangible assets will
continue to be amortized over their useful lives.  At December 31, 2002 and 2001
respectively, the Company had no other intangible assets.

In 1999,  the Company  entered into an agreement  through ATEAC Inc. to purchase
the assets and assume the related liabilities of GTE Alaska, a subsidiary of the
GTE  Corporation.  The agreement was between GTE  Corporation and ATEAC Inc., of
which the Company is a 25%  shareholder.  The excess of the purchase  price over
the assets  acquired has been  recorded as goodwill.  Prior to adopting SFAS No.
142,  the goodwill was  amortized  to expense on a  straight-line  basis over 40
years.  In accordance  with SFAS No. 142,  goodwill was tested for impairment by
comparing the fair value of the reporting unit to the carrying  value.  The fair
value of AP&T's goodwill  exceeded its carrying value and no impairment loss was
recorded.

The following table provides a reconciliation of previously  reported  financial
information  to amounts that reflect the  elimination  of goodwill  amortization
prior to adopting SFAS No. 142 at December 31:

                                              2002               2001
                                       --------------------------------------

Reported net income (loss)             $    (9,009,129)   $     1,571,592
Add back goodwill amortization                       -            221,056
                                       --------------------------------------
                                       $    (9,009,129)   $     1,792,648
                                       ======================================

     PRELIMINARY SURVEY AND INVESTIGATION COSTS

AP&T defers  costs  incurred for the  preliminary  survey and  investigation  of
proposed  construction projects in accordance with the rules of the Commissions.
These deferred  costs are  capitalized  into utility plant when the  preliminary
survey and investigation projects are completed or are charged to expense in the
period  that a proposed  project is  abandoned.  These  projects  are in various
stages of licensing and  development.  During 2002,  management's  evaluation of
these  projects  resulted in an amount of $268,265  being charged to expense and
believes that as of December 31, 2002 no further impairment exists.

                                                                              13

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


3.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     FUEL, SUPPLIES, AND OTHER INVENTORY

Fuel, supplies, and other inventory are valued at the lower of cost or market on
a first-in, first-out basis. The supplies and other inventory are primarily held
for use in  construction  projects  including  repairs  and  maintenance  of the
Company's delivery systems.

     CUSTOMER ADVANCES FOR CONSTRUCTION

Customer  advances for  construction  of additions to the electric  distribution
systems are deferred and amortized  through  discounted  service billings to the
customer over a 60-month  period.  At the end of the  amortization  period,  any
remaining  balance is recorded as a reduction of the  respective  utility  plant
accounts.

     INCOME TAXES

The Company is a member of a group that files consolidated  federal tax returns.
Accordingly,  income taxes payable to (refundable  from) the tax authorities are
recognized on the financial statements of the parent company who is the taxpayer
for income tax  purposes.  Deferred  taxes are  provided on a  liability  method
whereby deferred tax assets are recognized for deductible temporary  differences
and deferred tax liabilities are recognized for taxable  temporary  differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax basis. Deferred tax assets relate primarily to net
operating  loss  carry-forwards  and asset  impairment  deductions on the books.
Deferred tax liabilities relate primarily to survey and investigation  costs and
depreciation  expense.  Deferred tax assets are reduced by a valuation allowance
when, in the opinion of management, it is more likely than not that some portion
or all of the  deferred  tax will  not be  realized.  Deferred  tax  assets  and
liabilities are adjusted for the effects of changes in tax laws and rates on the
date of enactment.

     STOCK-BASED COMPENSATION

The Company has adopted the  disclosure  only  provisions of FASB  Statement No.
123,  and  applies  Accounting  Principles  Board  Opinion  No.  25 and  related
interpretation  in accounting for its employee stock option plans.  Accordingly,
the  Company's  stock-based  compensation  expense  is  recognized  based on the
intrinsic  value of the option on the date of grant.  Disclosure  in  accordance
with Statement 123 is provided in Note 12.

     EARNINGS PER SHARE

The Company has  calculated  its basic  earnings per share data according to the
method  prescribed  in FASB  Statement  No. 128 "Earnings per Share." Under this
Statement, basic

                                                                              14

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


3.  THE COMPANY AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

earnings per share are based on the weighted-average  number of shares of common
stock  outstanding,  excluding  any  potential  dilution that could occur if any
outstanding  options were  exercised.  Diluted  earnings  per share  reflect the
impact of the dilution  caused by  outstanding  stock options using the Treasury
Stock Method. FASB Statement No. 128 requires the dual presentation of basic and
diluted  earnings  per  share.   Average  stock   outstanding  for  purposes  of
calculating  diluted  earnings per share was  1,259,643 in 2002 and 1,253,305 in
2001  (including  the  dilutive  effect of stock  options  of 32,211  and 28,302
respectively).

     USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States  requires  management to make estimates
and assumptions  that affect the reported  amounts of assets and liabilities and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results could differ from those estimates.

     RECLASSIFICATIONS

Certain prior year amounts have been reclassified to conform to the current year
presentation. The effect of any reclassifications is immaterial.

4.  NEW ACCOUNTING POLICIES

In July 2001, the Financial  Accounting  Standards Board (FASB) issued Statement
of  Financial   Accounting  Standards  (SFAS)  No.  143,  Accounting  for  Asset
Retirement Obligations effective for fiscal years beginning after June 15, 2002.
This statement  provides  accounting  guidance for legal obligations  associated
with the retirement of long-lived assets.  Management is currently assessing its
legal obligations but believes there will be no material impact on the Company's
results of operations, financial position, or cash flows.

Effective January 1, 2002, the Company adopted SFAS No. 144,  Accounting for the
Impairment or Disposal of Long-Lived Assets,  which addresses the accounting and
reporting of all long-lived  assets,  except goodwill,  that are either held and
used or disposed of through sale or other means. Long-lived assets are evaluated
for impairment  whenever  events or changes in  circumstances  indicate that the
carrying  value of such  assets may not be  recoverable.  Impairment  losses are
measured as the amount by which the carrying  values of the assets  exceed their
fair values. (See Note 6)

In June 2002, the FASB issued SFAS No. 146, Accounting for Costs Associated with
Exit or Disposal Activities.  SFAS No. 146 supercedes Emerging Issues Task Force
(EITF) Issue



                                                                              15

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


4.  NEW ACCOUNTING POLICIES (CONTINUED)

No. 94-3,  Liability  Recognition for Certain Employee  Termination Benefits and
Other  Costs  to  Exit  an  Activity   (including   Certain  Costs  Incurred  in
Restructuring).  SFAS No. 146  requires  that costs  associated  with an exit or
disposal activity be recognized when the liability is incurred, whereas EITF No.
94-3 required  recognition  of a liability  when an entity  committed to an exit
plan.  The effect of SFAS No. 146 will be to change the timing of recognition of
liabilities  associated with disposal activities.  SFAS No. 146 is effective for
exit or disposal  activities  that are initiated  after December 31, 2002,  with
early  application  encouraged.  The Company has adopted the  provisions of SFAS
No.146 as of December  31, 2002 and  accounts for  liabilities  associated  with
disposal activities when they are incurred.

5.  PROPERTY, PLANT AND EQUIPMENT


                                                                                              DEPRECIATION
                                                             2002              2001               RATE
                                                      --------------------------------------------------------
                                                                                              
Electric:
   Hydroelectric                                            $ 20,270,830       $ 19,659,123            2%
   Other generation                                           14,696,632         14,347,912         4% to 8%
   Transmission and distribution                              30,188,481         29,132,703       2.5% to 4%
   Other                                                      11,093,826          9,592,531       2.5% to 20%
   Land                                                          773,477            698,477            -
   Utility plant acquisition adjustment                          325,403                  -            6%
                                                      -------------------------------------
                                                              77,348,649         73,430,746
Electric                                              -------------------------------------
Telecommunications:
   General support assets                                      8,768,061          5,996,958       2.5% to 20%
   Central office assets                                      12,223,359         12,019,256         8% to 13%
   Cable and wire facilities                                  14,296,161         12,876,785         4% to 6%
   Nonregulated investment                                     2,670,009          2,319,208        10% to 20%
   Land                                                          253,984            253,984            -
                                                      -------------------------------------
                             Telecommunications               38,211,574         33,466,191
                                                      -------------------------------------
Non-utility:
   Computer equipment                                                             2,813,426           20%
   Furniture and other equipment                                                    618,003            7%
   Buildings                                                     126,825            126,825          2.5%
   Leases and leasehold improvements                             223,770            425,688           10%
   Land                                                        1,094,277          1,094,276            -
                                                      -------------------------------------
                       Non-utility                             1,444,872          5,078,218
                                                      -------------------------------------
      Total property, plant and equipment                  $ 117,005,095      $ 111,975,155
                                                      =====================================


During 2002, the Company transferred various computers and office equipment from
non- utility assets to electric and telecommunications assets.

                                                                              16

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


6.  INVESTMENTS


                                                                2002               2001
                                                          -------------------------------------

                                                                      
Investment in CoBank                                      $     1,731,874   $     1,436,627
Investment in Ketchikan Electric Company, LLC                   1,000,000         1,670,418
Investments of Hydro West International                         2,787,328         2,845,711
Investment in Summit Alaska, Inc.                                       -         1,399,990
                                                          -------------------------------------
                                                             $  5,519,202   $     7,352,746
                                                          =====================================


COBANK
CoBank is organized  similar to a  cooperative  and is owned by the customers it
serves.  As such, a portion of CoBank's  earnings is returned to its  customers.
AP&T reinvests a portion of those  earnings in additional  stock of CoBank based
on a five-year average of the outstanding borrowings.

KETCHIKAN ELECTRIC COMPANY
The  Company  owns a 50% share of  Ketchikan  Electric  Company  LLC (KEC).  The
principal purpose and business of KEC is to construct, own, operate and manage a
hydroelectric  power system in the Ketchikan  Gateway  Borough.  The  investment
represents  capital  contributions  to  KEC,  as the  company  is  still  in the
development stage.  Management feels that changes in circumstances indicate that
the  carrying  value  of this  investment  may not be  recoverable  in full  and
expects,  more likely than not, the asset will be sold or otherwise  disposed of
significantly  before  the  end of its  previously  estimated  useful  life.  At
December 31, 2002,  an  impairment  loss was recorded in Income from  continuing
operations,  as other  income  (loss)  on  impaired  assets,  in the  amount  of
$670,418.  Additionally,  receivables  related to the  management  of KEC in the
amount of $215,555 have been included as loss on impaired assets. Management has
estimated the fair value of this investment to be $1,000,000.

HYDRO WEST INTERNATIONAL
On  September 7, 2000,  AP&T  entered into an agreement to purchase  100% of the
Members  Equity in Hydro West  Group  LLC,  (HWG) a  subsidiary  of Puget  Sound
Energy, Inc (PSE). The total purchase price of $2.3 million was allocated to the
assets. PSE provided  $1,725,000 of the financing  requirement for the purchase.
The principal assets of HWG were a 100% share of Hydro West International (HWI),
a 25% investment in the capital stock of Inversiones Pasabien,  S.A. and a 32.4%
investment in the capital stock of Hydro Honduras. Both minority investments are
accounted  for  under  the  Equity  Method.  Additionally,   during  2001,  AP&T
transferred the minority investments of HWG to its fully owned subsidiary HWI, a
Cayman Island Limited Company,  and subsequently  during 2002,  discontinued the
operations  of HWG.  At  December  31,  2002,  a loss in the amount of  $663,008
related to HWG was recorded on the Income Statement in Discontinued Operations.

                                                                              17

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


6.  INVESTMENTS (CONTINUED)

Hydro Honduras' principal purpose is to construct a 50 MW hydroelectric  project
in Honduras,  C.A. known as The Cangrejal Project.  Hydro Honduras has completed
the  licensing  and  environmental   study   requirements,   and  will  continue
negotiations  to  obtain  project  financing.  Management's  belief  is that the
decline in value of its  investment in Hydro  Honduras is other than  temporary,
and a loss of $55,282 was recorded as loss from impaired assets.  As of December
31, 2002, AP&T's investment in this entity totaled $500,000.

Inversiones Pasabien, S.A. owns a 12.5 MW hydroelectric plant in Guatemala, C.A.
During  2002,  the board of directors of  Inversiones  Pasabien  declared a cash
dividend payable to HWI of $186,904.  Management's belief is that the decline in
value of its investment in HWI is other than  temporary,  and a loss of $813,249
was recorded as loss from  impaired  assets.  As of December  31,  2002,  AP&T's
investment in this entity totaled $1,748,296.

During 2002, HWI made an additional  investment in 50% of the stock in Rio Hondo
Holding Co., a Cayman Island  Limited  Company,  whose  principal  purpose is to
construct a 32 MW  hydroelectric  project in  Guatemala,  C.A.  known as The Rio
Hondo II Project.  The project  company has completed the design,  licensing and
environmental  studies,  and is currently in negotiations  to obtain  additional
equity  participation  and project  financing.  As of December 31, 2002,  AP&T's
investment in this entity totaled $539,032.

Summit Alaska, Inc. (See Note 2)
On March 8, 2001 (the "closing"),  the Company purchased 44,000 shares of common
stock of Summit  Alaska Inc.,  (Summit),  at a total cost of  $1,212,141,  which
equaled 39% of the 112,907 shares outstanding.  The Company's  underlying equity
in the net assets of Summit was $838,973. The difference represented goodwill of
$373,168.

The Company also purchased land at closing for $950,000 where Summit  operates a
gravel pit under a management  contract.  The contract included a provision that
required  Summit  to pay the  company  a  royalty  fee  based  upon  the tons of
aggregate shipped.  The royalty fee for 2001 was $46,537. As part of the assumed
agreement  the company  also  purchased a Summit  subordinated  note  payable of
$800,000.

During  2002 and  2001,  the  Company  loaned  additional  amounts  to Summit to
purchase  equipment  and support its  operations.  The Company has also provided
guarantees to creditors of Summit. The Company's  guarantees to commercial banks
and other financing sources for obligations of Summit were estimated to be $18.6
million at December 31, 2002.

On December 15, 2002,  Summit Alaska Inc. filed a petition for liquidation under
Chapter 7 of the federal  bankruptcy laws in the United States  Bankruptcy Court
for the District of Alaska in Anchorage. At December 31, 2002, losses related to
the disposal of this investment  totaled  $26,970,411.  Management has estimated
the fair value of this investment to be $0.

                                                                              18

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


7.  RATE STABILIZATION ASSET

The Company is subject to the  provisions  of Statement of Financial  Accounting
Standards No. 71,  "Accounting  for the Effects of Certain Types of  Regulation"
(SFAS  71).  SFAS 71 allows  the  establishment  of  regulatory  assets  for the
allowable revenue  requirement or the capitalization of costs if those items are
expected to be recovered in future rates.  The Company has a regulatory asset of
$1,666,127 and $1,215,888 in 2002 and 2001, respectively.  The Company continues
to meet the  requirements  of SFAS 71 since the Company's  rates are intended to
recover the cost of service plus a rate of return on the  Company's  investment,
as well as providing specific recovery of deferred items in prior periods.

8.  LONG-TERM DEBT


                                                                                     2002              2001
                                                                               -----------------------------------
                                                                                            
  GOAT LAKE HYDRO,  INC.  (GLH),  note payable to secure Power Revenue
    Bonds series 1997.  Face amount of  $23,000,000  less the original
    issue  discount of  $268,181,  and the bond sinking fund amount of
    $345,000,  secured by the Power Sales  Agreement,  a  Construction
    Funding  Agreement,  and all  assets  of  Goat  Lake  Hydro,  Inc.
    Interest  rate  average  of 6% per year,  principal  due in annual
    installments from 2000 through 2032                                          $ 21,371,819     $ 21,700,989

NOTES PAYABLE TO COBANK:

  Note  payable,  secured by all assets of AP&T and its  subsidiaries,
    due in monthly  installments  and based on a 25-year  amortization
    with a balloon payment due in July 2013. Interest at 5.25%. At the
    settlement  date,  August 18,  2003 the amount of the  outstanding
    principal  due to  CoBank  under  the plan of  reorganization  was
    $55,769,128                                                                    57,014,860                -

  Note  payable  in  2001,  secured  by BBL  Hydro  Inc.,  assets  and
    revenues, restructured under the company's plan of reorganization.                      -        7,503,531

  Note payable  in 2001,  secured by  telephone  assets,  restructured
    under the company's plan of reorganization                                              -        3,464,341

  Note payable in 2001, secured by electric assets, restructured under
    the company's plan of reorganization                                                    -        3,275,798

  Note payable in 2001, secured by electric assets, restructured under
    the company's plan of reorganization                                                    -        3,034,968





                                                                              19

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002



8.  LONG-TERM DEBT (CONTINUED)


NOTES PAYABLE TO COBANK (CONTINUED):                                                 2002              2001
                                                                               -----------------------------------
                                                                                             
  Note payable in 2001, secured by electric assets, restructured under
    the company's plan of reorganization                                            $       -      $ 5,415,262

  Note payable  in 2001,  secured by  telephone  assets,  restructured
    under the company's plan of reorganization                                              -        5,811,794

  Note payable  in 2001,  secured by  telephone  assets and  revenues,
    restructured under the company's plan of reorganization                                 -       15,167,096

  Note payable in 2001, secured by electric assets, restructured under
    the company's plan of reorganization                                                    -        7,947,146

OTHER DEBT, unsecured, restructured under the company's plan of
   reorganization                                                                           -        6,700,000

NOTE  PAYABLE  TO PSE,  secured  by all  assets of  HydroWest,  due in
  interest only  installments  through  2005, at 5.25% fixed  interest
  with principle and interest  payments due,  starting in 2006 through
  December 2010.                                                                    1,599,514        1,725,000

NOTES PAYABLE TO STATE OF ALASKA,  secured by certain electric assets,
  with  interest  rates  ranging from 0% to 4.2%,  maturing at various
  dates from 2019 through 2037                                                      2,195,272        2,187,480

OTHER DEBT, unsecured,  with interest rates ranging from 5.45% to 11%,
  maturing at various dates from 2006 through 2007                                    111,648          213,805

UNSECURED CLASS 8 TERM DEBT - TRANCHE A, due in 10 years, with imputed
  interest of 7.25%                                                                13,008,850                -

UNSECURED CLASS 8 TERM DEBT - TRANCHE B, due in 10 years, with imputed
  interest of 10%. (less $568,000  payable in 2003, as per the plan of
  reorganization)                                                                     974,173                -
                                                                             -----------------------------------
                                                                                   96,276,136       84,147,210

                                                  Less current portion              3,210,046        3,066,976
                                                                             -----------------------------------

                                                  Total long-term debt            $93,066,090      $81,080,234
                                                                             ===================================



                                                                              20

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


8.  LONG-TERM DEBT (CONTINUED)

Annual  maturities for the five years beginning  January 1, 2003 are $3,210,046,
$1,638,891, $1,918,005, $1,907,290, and $1,991,490 respectively, and $85,610,414
thereafter.

Note payable by GLH to secure the Power  Revenue Bonds series 1997 is the result
of the  issuance on December  31,  1997 of a series of  tax-exempt  bonds by the
Alaska  Industrial  Development and Export Authority  (AIDEA).  The proceeds are
restricted  in use,  for the purpose of  financing  the  acquisition,  purchase,
construction,  improvement, and equipment of the project known as the Upper Lynn
Canal Regional Power Supply System.  Of these  restricted  funds,  $2 million is
required  to remain in reserve for the term of the bonds.  To secure  payment of
bond  principal  and interest,  AIDEA has assigned to U.S.  Bank Trust  National
Association  all rights and  interests  in the note.  The note is secured by all
assets and  revenues of GLH and a Power Sales  Agreement  (PSA)  between GLH and
Alaska Power Co. (APC),  both wholly owned  subsidiaries of AP&T. The Regulatory
Commission  of Alaska has  approved  the PSA for the life of the GLH note.  This
approval  allows APC to charge its  customers the entire annual costs as defined
in the PSA, i.e.,  principal and interest due on the bonds,  all operating costs
(excluding  depreciation),  general and administrative  costs, and the return on
equity  permitted by the Commission.  A portion of these annual costs is charged
to the rate  stabilization  asset (See Note 7),  representing  the amounts to be
collected from customers in future years.  The PSA requires all GLH's production
and sales of  electricity  be sold to and  purchased  by APC for the life of the
agreement.

A single note payable to CoBank which is secured by all assets and equity of the
Company and all of its wholly owned  subsidiaries  replaced  the previous  eight
obligations  outstanding to CoBank and was an integral  component of the Plan of
Reorganization.  Based on the plan, the principal  balance owing to CoBank as of
August 18, 2003 (the effective  date) was  $55,769,128  which  included  accrued
interest of $299,259 and a broken funding surcharge of $1,750,000.

The Plan of Reorganization outlines how payments are to be made to the Unsecured
Class 8 Claimants.  The Company shall make quarterly  payments on the discounted
Tranche A amount from 65.7% of the "cash  available  for  sharing" as defined in
the plan, for a period of ten years or until the amount is fully satisfied.  The
Company is not required to make installment  payments on Tranche B amounts,  but
is required to make payments upon the sale,  refinance or monetization of any of
the "Excluded  Assets" as defined in the plan.  The payments  shall be made on a
Pro Rata basis to the Class 8 claimants  who have an approved  claim by the U.S.
Bankruptcy court.

At  December  31,  2002,  the  Company  had no  unsecured  lines of credit  with
commercial banks. At December 31, 2001, the Company had a secured line of credit
of $4,000,000  from CoBank and  unsecured  lines of credit of  $10,000,000  from
other  commercial  banks.  The amount  outstanding  was  $14,000,000 and carried
variable interest from 3.90% to 4.06%.


                                                                              21

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


8.  LONG-TERM DEBT (CONTINUED)

Interest paid on debt was $4,881,814 in 2002 and $4,773,599 in 2001. There is no
material  difference  between  reported  interest  and  contractual  interest at
December 31, 2002.

At December 31, 2002, the company was in default of certain  negative  covenants
and financial ratio covenants under the Master Loan Agreement with CoBank. Under
the plan of reorganization these covenant defaults have been resolved. (See Note
1)

9.  OPERATING LEASE AGREEMENTS

AP&T leases a portion of its  administrative  office  space and a portion of its
utility plant under  noncancellable  leases expiring  through 2011. Rent expense
was $487,236 and $482,239 for 2002 and 2001, respectively. Certain of the leases
include renewal  provisions at AP&T's option.  Minimum rental  commitments under
noncancellable  operating  leases,  excluding  hydroelectric   operations,   are
$356,580. Minimum annual rental commitments are $59,985 in each of the next five
years.  Additional  cancelable lease agreements have been secured for the use of
the land for hydroelectric operations. The term of the agreements extend for the
life of the  hydroelectric  license of 50 years.  Rent expense for hydroelectric
operations was $180,845 in 2002 and $202,083 in 2001.

10.  INCOME TAXES



The components of the consolidated provision for income taxes are as follows:

                                                                             2002              2001
                                                                       ------------------------------------
                                                                                     
       Current:
          Federal                                                      $              0    $    (627,666)
          State                                                                       0          (79,130)
                                                                       ------------------------------------
                                                                                      0         (706,796)

       Deferred                                                              (5,855,431)       1,340,441
                                                                       ------------------------------------
                                         Provision for income taxes    $     (5,855,431)   $     633,645
                                                                       ====================================

Total tax expense differs from that computed at the statutory federal income tax
rate due to the following:
                                                                            2002               2001
                                                                    ---------------------------------------

      Income tax provision at federal rate of 34%                      $     (5,053,950)   $     749,781
      State income taxes, net of federal benefit                               (814,976)         119,201
      Benefit of cash dividends paid to ESOP members                            (75,896)        (108,799)
      Other                                                                      86,931         (126,538)
                                                                    ---------------------------------------
                                        Provision for income taxes     $     (5,855,431)   $     633,645
                                                                    =======================================


                                                                              22

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


10.  INCOME TAXES (CONTINUED)

The  components  of the deferred tax assets and  liabilities  as of December 31,
2002 and 2001 are as follows:

                                                 2002              2001
                                        -------------------------------------
     Current:
        Deferred tax assets              $      (140,225)   $     (174,557)
        Deferred tax liabilities                  24,219            39,224
                                        -------------------------------------
                                                (116,006)         (135,333)
                                        =====================================

     Noncurrent:
        Deferred tax assets                   (7,263,277)         (386,003)
        Deferred tax liabilities               9,581,287         8,725,189
                                        -------------------------------------
                                         $     2,318,010    $    8,339,186
                                        =====================================

Federal and state income taxes paid were $ 0 in 2002 and $ 78,520 in 2001.

Management  anticipates  generating  enough  taxable  income in future  years to
utilize all of the deferred tax assets, which consist primarily of net operating
loss  carryforwards,  and  therefore  has not recorded a valuation  allowance to
offset the net deferred tax asset.

At December 31, 2002, the Company had unused net operating loss carryforwards of
approximately $4,150,000 which expire in 2022.


11.  EMPLOYEE STOCK OWNERSHIP PLAN

AP&T  maintains  an  employee  stock  ownership  plan.  All  employees  who have
completed one year of full-time  service (1,000 hours) and have attained the age
of 21 are  eligible  to  participate  in the  plan.  Participants  may  elect to
contribute from 1% to 13.5% of their wages to the plan, which can be invested in
the  common  stock  of  AP&T  or  into  other  investment   accounts.   Employer
contributions  match the  participant's  contributions up to the first 3% of the
participant's  wages.  Employer matching  contributions  were $0 and $170,633 in
2002 and 2001, respectively. Additional employer contributions are made annually
at  8% of  the  eligible  employees'  gross  wages.  These  additional  employer
contributions  were  $487,097  and  $486,200  in 2002  and  2001,  respectively.
Employer contributions are allocated to all plan participants as of December 31,
the end of the plan year.  The plan  provides  that  participants'  interests in
employer-funded contributions become fully vested after three years of full-time
employment.  ESOP shares  outstanding  are  included in the  earnings  per share
calculations.  As part of the Plan of  Reorganization,  the ESOP was modified to
provide  that  matching  contributions  will be made at the  desecration  of the
employer in an amount up to 5% of participant's wages.  Additionally,  a defined
contribution of 3% will be made to each eligible participants account annually.

                                                                              23

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


12.  STOCK OPTION PLAN

In 1991,  AP&T  established a stock option plan. The plan provides for the grant
of incentive stock options. Stockholders have approved a total of 310,000 shares
to be reserved for the plan from the authorized and unissued common stock. These
options  vest and  become  exercisable  five  years  after the date of grant and
expire ten years after the date of grant.  The effect on net income and earnings
per  share of the  fair  value  approach  under  FASB  Statement  No.123  is not
materially different from those amounts recorded under APB 25.

A summary of the activity related to the plan is as follows:



                                                                      WEIGHTED
                                                      SHARES      AVERAGE EXERCISE
                                                      UNDER        PRICE PER SHARE
                                                      OPTION
                                                 -----------------------------------
                                                                    
    Balance at December 31, 2000, unexercised        188,000              21.19
       Granted                                        74,500              26.00
       Canceled                                      (15,700)             17.01
       Exercised                                      (2,800)             16.53
                                                 -----------------
    Balance at December 31, 2001, unexercised        244,000            $ 22.98
                                                 -----------------
       Granted                                             -                  -
       Canceled                                            -                  -
       Exercised                                           -                  -
                                                 -----------------
    Balance at December 31, 2002, unexercised        244,000            $ 22.98
                                                 =================


13.  BUSINESS SEGMENT INFORMATION

The Company's  electric segment  provides retail and wholesale  electric service
including both hydro electric and diesel generation facilities in rural portions
of Alaska.  The Company's  telecommunications  segment  provides local telephone
service also in rural areas of Alaska.  The  Company's  reportable  segments are
strategic business units managed separately due to their different operating and
regulatory  environments.  The "All other" category includes the parent company,
segments below the  quantitative  threshold for separate  disclosure,  and other
business  activities.  Other segments  principally include global hydro electric
power development.  Other business activities principally included the gains and
losses on the sale and disposition of other non-core businesses.





                                                                              24

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


13.  BUSINESS SEGMENT INFORMATION (CONTINUED)



(All numbers in thousands)                 Regulated      Regulated
                                           Electric        Telecom      All Other     Consolidated
                                          ------------   -----------   -----------   --------------
2002
                                                                             
Operating Revenue                            $ 12,823      $ 14,008      $  1,570        $ 28,401
Depreciation and amortization                   2,556         2,554           188           5,298

Operating Income                                4,036         1,322            (9)          5,349
Interest expense                                2,505         1,110           595
Interest income                                   201             -            78             279

Equity Earnings in Investments                      -             -          (629)           (629)
Total Assets                                   77,488        36,426         3,091         117,005
Capital Expenditure                             3,940         2,280           281           6,501


2001
Operating Revenue                              12,949        13,850         1,346          28,145
Depreciation and amortization                   2,357         2,673           195           5,225
Operating Income                                4,343         2,111          (334)          6,120
Interest expense                                2,670         1,503           276           4,449
Interest income                                   391             -           261             652

Equity Earnings in Investments                      -             -          (399)           (399)
Total Assets                                   73,431        32,003         6,541         111,975
Capital Expenditure                          $  4,060     $   3,840      $  2,700        $ 10,600


Intercompany  payables are due to the Parent company from Regulated Electric and
Telecom  subsidiaries  in the amounts of $16.3  million and $16.5 million at the
end of 2002 respectively.  AP&T and its subsidiaries are being treated as though
they  were  substantively  consolidated  with  Intercompany  transactions  being
allowed  claims  for  purposes  of its  reorganization,  but are  eliminated  in
consolidation for financial accounting purposes.

14.  DISPOSITION OF SUBSIDIARY BUSINESSES

In December 2002, Alaska Power & Telephone's  Board of Directors  approved a new
strategic direction that included the disposition of several  businesses.  These
businesses include AP&T Construction  L.L.C., AP&T Solutions L.L.C.,  Hydro West
Group L.L.C.,  and Treeline  Electric L.L.C.  The results of operations of these
businesses are included in AP&T's  Consolidated  Statements of Income "Loss from
discontinued operations."



                                                                              25

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


14.  DISPOSITION OF SUBSIDIARY BUSINESSES (CONTINUED)

In December 2002, AP&T  Construction,  L.L.C.  ceased all activities  associated
with this "start up" business.  AP&T Construction  concluded its activities with
an  operating  loss of  $293,912  for the year then  ended.  All  assets of AP&T
Construction were absorbed by the parent company.

In December 2002, AP&T Solutions,  L.L.C. ceased all activities  associated with
this "start up"  business.  AP&T  Solutions  concluded  its  activities  with an
operating loss of $106,587 for the year then ended. All assets of AP&T Solutions
were absorbed by the parent company.

In December 2002,  Hydro West Group L.L.C.  ceased all operations.  An operating
loss of $404,308 and a loss of $258,701 from  disposition of assets was recorded
for the year then ended.

In December 2002,  Treeline  Electric L.L.C. was sold for $50,000 resulting in a
"Loss on disposition of assets" of $606,840. Operations of Treeline Electric for
the year then ended, resulted in a loss of $542,514.

The  summary  of results  from  discontinued  operations  at  December  31 is as
follows:



                                                                              2002               2001
                                                                        -------------------------------------
                                                                                      
           Operating revenue                                            $      2,718,501    $    1,189,996
           Operating expenses                                                  4,065,821         1,131,254
                                                                        -------------------------------------
                                        Net operating income (loss)           (1,347,320)           57,863
           Impairment loss                                                     ( 865,540)                -
                                                                        -------------------------------------
                                  Income (loss) before income taxes                                 57,863
                                                                        -------------------------------------
           Income tax benefit (expense)                                          873,703           (16,626)
                                                                        -------------------------------------

           Income (loss) from discontinued operations                   $     (1,339,157)   $       41,237
                                                                        =====================================



15.  FAIR VALUE OF FINANCIAL INSTRUMENTS

The fair  value of a  financial  instrument  represents  the amount at which the
instrument could be exchanged in a current  transaction between willing parties,
other than in a forced sale or  liquidation.  Significant  differences can arise
between the fair value and  carrying  amount of financial  instruments  that are
recognized at historical cost amounts.

                                                                              26

                Alaska Power & Telephone Company and Subsidiaries

                   Notes to Consolidated Financial Statements

                                December 31, 2002


15.  FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)

The following methods and assumptions were used by AP&T in estimating fair value
disclosures for financial instruments:

CASH, ACCOUNTS RECEIVABLE,  ACCOUNTS PAYABLE AND ACCRUED  LIABILITIES,  CUSTOMER
DEPOSITS,  AND ACCRUED EMPLOYEE  BENEFITS:  The carrying amounts at December 31,
2002 approximate the fair values due to the short maturity of these instruments.

LONG-TERM DEBT:
The fair value of AP&T's  long-term debt is estimated by discounting  the future
cash  flows of the  various  instruments  at rates  currently  available  to the
Company for similar debt instruments of comparable maturities.

The carrying  amount of long-term debt  approximate  the estimated fair value at
December 31, 2002 due to the low interest rate environment and the current rates
for the company's long-term debt obligations.
































                                                                              27


EXHIBIT C

1. Name of claimant is Alaska Power & Telephone Company (AP&T). AP&T operates as
a regulated public utility providing electric and/or telephone service. AP&T is
fully regulated by the Regulatory Commission of Alaska (RCA). AP&T is a Holding
Company with the following subsidiaries:

Electric Operations
Alaska Power Company - Serving the following communities in Alaska: Skagway,
     Haines, Tok, Dot Lake, Chistochina, Mentasta Lake, Tetlin, Tanacross, Healy
     Lake, Bettles/Evansville, Northway, Northway Village, Allakaket/Alatna,
     Eagle, Eagle Village, Craig, Hydaburg, Hollis, Coffman Cove, Klawock, and
     Whale Pass. (Retail and wholesale electric generation and distribution).

BBL Hydro, Inc. -  Prince of Wales Island (wholesale hydroelectric generation).

Goat Lake Hydro, Inc. -  Skagway (wholesale hydroelectric generation).

Telecommunication Operations
Alaska Telephone Company - Serving the following communities in Alaska: Skagway,
     Tok, Dot Lake, Dry Creek, Tetlin, Chisana, Healy Lake, Craig, Hydaburg,
     Hollis, Naukati, Whale Pass, Myers Chuck, Edna Bay, Metlakatla, Petersburg,
     Wrangell, and Haines.

Bettles Telephone, Inc. - Serving; Bettles, Evansville and Jim River Camp.

North Country Telephone, Inc. - Serving; Eagle and Eagle Village.

AP&T Wireless  Inc. - Serving; Ketchikan, Juneau and the surrounding areas.

AP&T Long Distance Inc. - Serving; Alaska communities

2. All public utility operations of AP&T are conducted solely within Alaska.
There is no natural gas activity. Diesel-powered generators and or hydroelectric
generation systems generate the electric service in each location. There is no
intertie to other electric systems or generation sources.

3.  (a)  Number of kWh sold (by individual subsidiary):
         Alaska Power Company     60,842,753  kWh retail
                                     905,800  kWh wholesale
    (b)  None sold or distributed out of the state of Alaska.
    (c)  None sold or distributed out of the state of Alaska.
    (d)  None sold or distributed out of the state of Alaska.

4. There are no holdings directly or indirectly in an EWG. The following
subsidiary of AP&T holds an interest in a foreign hydroelectric generation
company.

Nonregulated Operations

HydroWest International ("HWI"), located in Cayman Islands, is a holding company
for offshore operations related to the HydroWest Group, providing engineering
and consulting services, primarily related to small hydroelectric power
projects. A 25% equity ownership share of Inversiones Pasabien, S.A. was
transferred from HWG to HWI in 2001.

    (a)  HWI, Ltd is a wholly-owned subsidiary of AP&T, equity was $4,228,683 at
         12/31/2002.

Hydro West Group, LLC. ("HWG") - Located in Port Townsend, Washington and
providing engineering and consulting services, primarily related to small
hydroelectric power projects. HWG transferred its 25% equity share of
Inversiones Pasabien, S.A. to HWI in 2001.

As of December 31, 2002, all operations of HWG were discontinued.