Off-take Agreement (Annotated)

Editor's Note: This form contemplates a project finance transaction in the energy sector, such as a refinery or gas mine, that includes a long-term off-take agreement whereby a purchaser agrees to purchase a specified minimum quantity of products. Off-take agreements represent the source of revenue for the project. Long-term off-take agreements are commonly used to reduce credit risk by “smoothing” a project's earnings and frequently form a part of the credit support package for the associated project financing. The off-take contract validates the financial projections lenders use to determine the viability of an unconstructed facility that has yet to generate cash flows. Lenders counsel is likely to review the terms and may even provide comments. The buyer often holds a direct or indirect financial interest in the project itself. Regardless, the parties typically cooperate very closely to ensure that the project is a success. Accordingly, negotiation is often more collegial and more dependent on financial and market projections than supply and demand or one party's market power. The goal is generally to eliminate all unnecessary risk and cost for all parties.

OFF-TAKE AGREEMENT

This OFF-TAKE AGREEMENT (“Agreement”) is made and entered into as of [Date] between [Full Legal Name of Company], a [Type of Entity] located at [Address] (“Seller”) and [Full Legal Name of Company], a [Type of Entity] located at [Address] (“Buyer”). Seller and Buyer are collectively referred to as the “Parties” and individually as a “Party.”

WHEREAS, the Seller is duly organized in accordance with the laws of [Jurisdiction], [Country]; WHEREAS, the Buyer is duly organized in accordance with the laws of [Jurisdiction], [Country]; WHEREAS, the Seller owns and operates the [Describe Project] (“Project”);

WHEREAS, Subject to the successful completion of Project financing, the Seller will construct a plant with anticipated production of approximately [Indicate Output Capacity] per annum of [Type of Product] (“Product”);

Comment: If the Buyer holds a financial interest in the Seller's project, or if the Seller's project is itself only part of a larger project of the Buyer's, the off-take agreement may include substantive provisions requiring the Seller to construct and operate the necessary manufacturing or processing facilities, including provisions for Buyer's inspection and approval of construction.

WHEREAS, The Seller desires to sell to the Buyer, and the Buyer desires to purchase from the Seller, the Committed Product Amount (as hereinafter defined) in accordance with the terms and conditions of this Agreement;