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Sign Offtake Agreement

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Due to improved copper market conditions, Aura expects Aranzazu to have “substantial savings” under the new agreement and improves gross margins by 4 percentage points over the existing agreement. Following MoU`s announcement in April 2020, Prospect Resources has entered into an acquisition agreement with Sibelco N.V, the world leader in industrial minerals. As a general rule, the buyer requires specific commitments from the project owner during the operating phase to ensure that the project is carried out in accordance with good sectoral practices and that no operational risk poses a significant risk to the buyer`s activity. The main impact is twofold. First, the proponent must ensure that certain project management skills and procedures are available to meet these obligations (communication procedures, operating and financing reports, measurement requirements, availability of projected failures, etc.). Secondly, the project owner must guarantee flexibility under the PPP in order to optimize the D-M activities and maximize the project`s EBITDA. There are many ways to manage price risk within an AAE. The developer will choose either a fixed price to take back all the energy or a variable price that refers to a market price index. An intermediate solution is often used in which the parties agree either to a fixed price for part of the energy volume, to a variable pricing with a soil mechanism, or to a neck structure (with a floor and ceiling at a variable price). While in business AAEs, parties generally rely only on a fixed price for at least 75%-80% of projected production, the price conditions in traditional PPPs can be much more complex.

A levelled price analysis should be conducted to adequately assess all potential pricing options. If no risk reduction measures have been considered under the AAE, the developer can at any time purchase price security tools provided by financial agents and distributor agents in order to optimize the project`s revenue based on market price forecasts. The buyer can usually opt out of an agreement. However, he will probably have to pay a tax. Offtake agreements also offer benefits for the buyer. They ensure a fixed price before production.

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