Take-or-pay Contracts and Throughput Agreements

Ron Paterson

Chapter 8 in Off Balance Sheet Finance, 1993, pp 69-72 from Palgrave Macmillan

Abstract: Abstract Take-or-pay contracts and throughput agreements are unconditional commitments to buy goods or services from a supplier in the future, generally from a new facility created by the supplier. From the supplier’s point of view, such contracts guarantee a certain level of sales which gives assurance that the facility will be viable and expedite the financing; from the purchaser’s point of view, it secures a medium or long term source of supply, probably at favourable prices. Sometimes the supplier is set up by a consortium of customers who wish to share a particular facility, such as a pipeline to service the needs of a number of oil companies. Under these contracts, the purchaser is obliged to pay a certain minimum amount even if, in the event, it does not take delivery of the goods or use the services it has contracted for.

Keywords: Cash Flow; Balance Sheet; Financing Arrangement; Conference Centre; Contractual Commitment (search for similar items in EconPapers)
Date: 1993
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DOI: 10.1007/978-1-349-12613-2_8

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