OVERVIEW OF OFFTAKE AGREEMENTS:Offtake Agreements may only be...

OVERVIEW OF OFFTAKE AGREEMENTS:

Offtake Agreements may only be one document in a package of dozens of critically important project finance documents Offtake Agreements may be the most critical in terms of securing project loan approval. Overall, while well-written, well-presented project documents ensure that lenders will have a generally favorable impression of your project, Offtake Agreements are given a different level of scrutiny. Every project finance lender in the world scrutinizes Offtake Agreements because lenders rely on Offtake Agreements to provide the financial assurances they need to validate the cash flow forecasts that form the basis for loan repayment. Because the project is not yet built or operating, there is no existing cash flow to pay debt service, there are only financial models which are far less certain. Offtake Agreements provide project lenders with documentary evidence which supports and validates the financial models and projections upon which the ability to repay is based. Quite simply, Offtake Agreements make many projects bankable. An Offtake Agreement establishes the contractual framework for a long-term business arrangement between the project company and an off-taker for the purchase and sale of all or substantially all of the project output. Offtake Agreements provide fixed or contractually adjusted prices for as long as ten years or more into the future, so it is easy to understand why they have so much influence in the financing approval process.