Regards floor prices and the ‘breaking’ of them:
@SimonGr kindly provided this insight over on PLS thread which I found useful and may also be useful to others:[see here]
Hi Sabine - a note on ‘floor’ and ‘ceiling’ prices.
When these terms are used in supply contracts they usually mean that the seller doesn’t have to sell below the floor (but there’s no obligation for the buyer to buy at the floor if it’s above the formula). The reverse is then applied at the ceiling (the seller doesn’t have to pay the formula price if it’s higher ... and the seller doesn’t have to supply).
When there is an obligation to take supply at a floor price the term “Take or Pay” is used. I’ve only seen these applied against base level supply volumes for pipeline supplied natural gas and ethane. With the contracts written prior to facilities coming on stream.
Hence, I’d guess that GFL has likely honoured the supply contracts ... it’s just that they choose to decline supply once the floor price was triggered (so AJM and probably PLS agreed to sell at lower prices).
Cheers, Simon
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