Take-or-Pay contracts are fundamental to the effective
operation of contracts across the mining and energy sectors, but
times change and what seemed a good deal may look very different
when you are on the wrong end of the bargain. Matthew Saunders and
David Harley suggest ways for buyers and sellers to protect
themselves in a dynamic market.
Take-or-pay contracts are fundamental to the effective operation
of contracts across the mining and energy sectors, providing
certainty of income to sellers, a crucial feature for projects with
very large initial capital investment. They are vital for project
proponents who have invested large amounts of capital into a
project for start-up purposes, and now need the commercial
certainty of guaranteed income in order to finance project loans
– indeed, lenders will often not fund projects without take
or pay commitments in place to provide certainty of the ability to
repay financing loans.
