TAKE OR PAY CONTRACT. The Customer understands that this is a “TAKE OR PAY CONTRACT”. The Customer understands that if the Customer refuses to accept delivery of, and pay for, the Contracted Quantity of Fuel by the expiration of the Term the Customer will be liable to the Coop for the damages specified by Section Five (5) of this Agreement.
TAKE OR PAY CONTRACT. The most common type of off-take contract in an energy project The buyer/utility, on an agreed price basis, is obligated to pay for product, whether or not it actually takes delivery It provides a guaranteed stream of income to the seller Keeps the bankers happy NOTE:
TAKE OR PAY CONTRACT. A take or pay contract is a legal agreement between an offteker of a facility’s output and a project company, under which the offtaker agrees to take the project’s product or to make payments to the project company for its good or service to maintain its capacity to produce and deliver the good or service. Moreover, the offtake purchaser makes payments whether or not the good or service is generated at the purchaser’s request. Therefore, the buyer payment obligation for the capacity component is unconditional. 7 Under take-or-pay contracts, payments may be set to cover all fixed costs of the project, fixed operating costs and maintenance costs, debt service, after-tax equity return, or may cover only part of the project’s available capacity.8 It should be noted that, sometimes, these contracts are on a “hell-or-high water” basis9 where, the payment obligation exists even if the project company produces nothing or it is incapable of producing anything. Additionally, in the 1950s and 1960s,a number of so-called “promotional pipelines” were financed on the basis of take-or-pay contracts, which freed the gas purchasers from their obligations to pay in certain circumstances of force majeure.10
