Offtake contracts—key issues for project finance lenders


Published by a ³ÉÈËÓ°Òô Banking & Finance expert
Practice notes

Offtake contracts—key issues for project finance lenders


Published by a ³ÉÈËÓ°Òô Banking & Finance expert

Practice notes
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Most projects are underpinned by a complex web of contractual relationships between all the parties involved in the project (eg the project company, equity investors, contractors, sub-contractors, offtakers and suppliers). These documents are generally referred to as the 'project documents' (see: Project documents—issues for lenders—overview).

In projects involving the production or exploitation of a product (eg a power project or a mine project), the offtake contracts are some of the principal project documents.

What is an offtake contract?

An offtake contract is a contract under which a third party (the Offtaker) agrees to buy a certain amount of the product produced by a project at an agreed price. The product is often a commodity such as oil, gas, minerals or power.

The purpose of an offtake contract is to:

  1. •

    secure a predictable revenue stream for the project, and

  2. •

    ensure that there is a guaranteed buyer for project production (particularly where demand for the product is likely to fluctuate)

It is not always necessary for the project company to enter into

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United Kingdom
Key definition:
Project company definition
What does Project company mean?

The company established by the selected tenderer in a PFI project to be the contracting vehicle for a project.

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