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Business Risks
The risks identified below are specific to the Saskatchewan System. General risks that affect the Fund as a whole are described under Risk Factors.
Competition
The Saskatchewan System faces competition in pipeline transportation from other pipelines as well as other forms of transportation, most notably trucking. These alternative transportation options could charge rates or provide service to locations that result in greater net profit for shippers with the effect of forcing the Saskatchewan System to lower its transportation rates to avoid losing shippers, thereby reducing cash flow. The Saskatchewan System manages exposure to shippers and competition by ensuring the shipping rates are competitive and by providing a high level of service. Further, the Saskatchewan System's right-of-way and expansion efforts have served to provide this segment with a competitive advantage. The Saskatchewan System will continue to focus on increasing efficiencies and its expansion projects in order to meet its shippers' growing demand.
Demand for Services
Operations and tolls for the Saskatchewan Gathering and the Westspur Systems are based on expired agreements with certain crude oil shippers and are monitored on a customer complaint basis. The majority of the volumes shipped on these systems are transported on terms similar to a common carrier basis with no specific on-going volume commitments. There is no assurance that shippers will continue to utilize these systems in the future or transport volumes on similar terms or at similar tolls.
Credit Risk
The Saskatchewan System's trade receivables consist primarily of amounts due from companies operating in the oil and gas exploration and development industry. The credit risk associated with these receivables is mitigated by credit exposure limits, contractual and collateral requirements and netting arrangements.