"Take or Pay ‘Take or pay’ clauses are particularly common within the energy, resources and infrastructure sectors, particularly in long term gas sales agreements, coal supply agreements, port and rail access arrangements and other off-take contracts. The significant financial commitment required for the exploration, production, shipping and distribution facilities often makes it necessary for the participating companies to seek ‘security’ as to the level of supply and demand throughout the duration of any supply or sale arrangements so as to guarantee the future returns on their significant financial commitment.
Take or pay clauses have therefore developed to the benefit of both purchasers and suppliers. The supplier is guaranteed a regular income stream, while the purchaser commits to pay for a minimum quantity to guarantee a regular but flexible supply. In the event that the purchaser is not able or willing to take the agreed minimum amount, it is required to pay for it."
With regard to the construction of the rail link and line upgrades, the value in them imo is that they give us considerable negotiating power!
Onwards and upwards GS
RES Price at posting:
43.5¢ Sentiment: Buy Disclosure: Held
