GTN

GTN asserts that the Ruby Pipeline is a financially risky project. Ruby's sole sponsor, El Paso, has a junk bond credit rating and does not intend to invest any equity into the project. Project financing will be based on the contractual commitments of shippers like PG&E. Because all the shipper contracts have fixed rates, the Ruby project is at risk for cost overruns. Since the start of 2008, Ruby's costs have increased by 50%. If additional overruns occur, which GTN views as likely, the Ruby project may fail.

An even greater risk, in GTN's view, is that Ruby's shipper contracts generally have a term of 10 to 15 years. In contrast, lenders generally assume a project service life of 30 years. Thus, Ruby's lenders are at risk for half or more of the depreciable life of the project. This means the debt financing for the Ruby project will be expensive, adding considerable financial risk to the project.