Offtake agreement

Offtake agreement,

Definition of Offtake agreement:

  1. An agreement entered between a producer and a buyer to buy/sell a certain amount of the future production. It is generally negotiated long before the construction of a facility to guarantee a market for the facilitys future production and improve chances of getting financing for the installation concerned.

    These agreements are fairly common in the natural resource sector, where capital costs to extract the resources are important. They usually include several protective clauses and can take months to negotiate.

  2. An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer's upcoming goods. An offtake agreement is normally negotiated prior to the construction of a production facility—such as a mine or a factory—to secure a market for its future output.

  3. Offtake agreements are typically used to help the selling company acquire financing for future construction, expansion projects, or new equipment through the promise of future income and proof of existing demand for the goods.

How to use Offtake agreement in a sentence?

  1. An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer's yet-to-be-manufactured goods.
  2. An offtake agreement is negotiated far in advance, often before construction of the manufacturing facility and actual production has begun.
  3. Offtake agreements make it easier for producers to obtain financing.
  4. Offtake agreements can help buyers lock in a price and guarantee supply of a product.

Meaning of Offtake agreement & Offtake agreement Definition