The risks identified below are specific to the Saskatchewan System. General risks that affect the Fund as a whole are described under Risk Factors.
The Saskatchewan System faces competition in pipeline transportation from other existing or proposed 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 created a competitive advantage. The Saskatchewan System will continue to focus on increasing efficiencies and economically expanding the capacity of its facilities in order to meet its shippers’ growing demand.
When undertaking a significant capital program, such as the Saskatchewan System Capacity Expansion, the Fund faces the risk of ineffective execution of the capital plan, which could result in cost over-runs, construction and regulatory delays. To mitigate these risks, clearly defined management and governance structures for all major projects are established, and strategic relationships with landowners, suppliers, contractors and other stakeholders are formed and maintained. Additionally, Enbridge’s Human Resources department ensures that compensation programs, communications and working environments are designed to attract, develop and retain qualified personnel.
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 ongoing 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.
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 utilization of credit exposure limits where appropriate, credit enhancement including contractual and collateral requirements, and netting arrangements.