OFFTAKE ARRANGEMENT

OFFTAKE ARRANGEMENT

An offtake arrangement is an agreement between a producer and a buyer to purchase or sell portions of the producer’s future production.

An offtake agreement is normally negotiated prior to the construction of a facility in order to secure a market for the future output of the facility.

Because the selling company has a potential market, such arrangement helps to secure finance and funding from investors which is known as Bankable Offtakes

THE BENEFITS OF OFFTAKE ARRANGEMENT

It helps the seller to secure a guaranteed market and source of revenue plus a guaranty of a minimum level of profit for their investment.

From the buyer’s perspective, it is a way to secure a particular price before production, which in turn serves as a hedge against future price changes.