Take-or-pay contract
The take-or-pay contract (abbreviation: ToP contract ; German "buy or pay" ) is a contract in which someone assumes an unconditional obligation to pay , regardless of whether the other contracting party receives an agreed consideration through the delivery of Provides goods or services . The opposite is the take-and-pay contract .
General
It is a contractual obligation to purchase and to pay the purchase price for a certain number of manufactured products , which serves to hedge sales risks . With a take-or-pay contract, the buyer assumes a payment guarantee. If the agreed delivery is not accepted, payment for the amount not accepted will still be due. In this way, the seller can also cover the sales risks in the event of production disruptions.
Example gas industry
In the gas industry , the seller undertakes to deliver gas up to a specified amount and the buyer to pay this amount, regardless of whether he has actually purchased this amount.
Such take-or-pay contracts often have very long terms of up to 25 years for bulk buyers . Due to these long terms, no fixed prices are usually agreed. Instead, price adjustments are made or conditions for renegotiations are specified. The price is often determined using a so-called netback invoice. The netback market value for a specific customer group is calculated at the import point using the lowest price of a competing energy source (e.g. the prices for crude oil , heating oil , coal ) minus the costs for transport, storage, measurement, taxes, etc. The development of the weighted , average netback value of all gas customer groups results in the price escalation clause of the gas import contract.
This type of pricing, which is based on the prices of competing energy sources, ensures the highest possible utilization of the pipeline infrastructure. In addition, this pricing leads to a special risk allocation between producers and importers. The risks in the gas industry lie on the one hand in the development of the prices of competing energy sources and on the other in a general market risk that arises from unforeseen economic fluctuations , changes in preferences, as well as technical developments and the competitive situation between companies in the gas industry.
By passing on price fluctuations of the competing energy sources to the producers, they bear the price risk, while the importers bear the volume risk due to changed market conditions. In the past, it was possible to further reduce this volume risk by only having access to the transport and distribution networks in a certain supply area to a certain company and completely denying it to third parties ( market barrier ). The importers were able to forecast the long-term demand with relative certainty and reduce their volume risk. However, with the introduction of a gas-to-gas competition or so-called third party access (ie the opening of access to the transport networks for third parties), this option is eliminated (at least in part), since third parties then have access to a supply area. The existence of ToP contracts in the gas sector seems to be called into question.