Company: PAGP
Filing Date: 2025-02-28
Form Type: 10-K
Source: 0001581990-25-000006
Chunk: 443

Company: PLAINS GP HOLDINGS LP
Filing Date: 2025-02-28
Form: 10-K
Item: Item 1A
Chunk 443
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 law, taxation, safety or environmental policy, and other areas that PAA may not be able to manage effectively. Management’s assessment of the risks in these new lines of business may be inexact and not identify or resolve all the problems that PAA would face. If PAA is not able to enter into these new lines of business effectively or at all, it could limit PAA’s future growth if such emerging energy businesses grow and become a more important part of the energy industry.

PAA is exposed to the credit risk of its customers and other counterparties it transacts with in the ordinary course of its business activities.

Risks of nonpayment and nonperformance by customers or other counterparties are a significant consideration in PAA’s business. Although PAA has credit risk management policies and procedures that are designed to mitigate and limit its exposure in this area, there can be no assurance that PAA has adequately assessed and managed the creditworthiness of its existing or future counterparties or that there will not be an unanticipated deterioration in their creditworthiness or unexpected instances of nonpayment or nonperformance, all of which could have an adverse impact on PAA’s cash flow and its ability to pay or increase its cash distributions to its partners.

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Table of ContentsIndex to Financial Statements

PAA has a number of minimum volume commitment contracts that support its pipelines. In addition, certain of the pipelines in which PAA owns a joint venture interest have minimum volume commitment contracts. Pursuant to such contracts, shippers are obligated to pay for a minimum volume of transportation service regardless of whether such volume is actually shipped (typically referred to as a deficiency payment), subject to the receipt of credits that typically expire if not used by a certain date. While such contracts provide greater revenue certainty, if the applicable shipper fails to transport the minimum required volume and is required to make a deficiency payment, under applicable accounting rules, the revenue associated with such deficiency payment may not be recognized until the applicable transportation credit has expired or has been used. Deferred revenue associated with movements by shippers of volumes that are less than minimum volume commitments could be significant and could adversely affect PAA’s profitability and earnings.

In addition, in those cases in which PAA provides division order services for crude oil purchased at the wellhead, it may be responsible for distribution of proceeds to all parties. In other cases, PAA pays all of or a portion of the production proceeds to an operator who distributes these proceeds to the various interest owners. These arrangements expose PAA to operator credit risk, and