Projects will need to have a revenue stream which is estimable in advance with a high degree of certainty. This means that the project may enter into a long-term offtake agreement with a creditworthy offtaker with fixed price and minimum purchase obligations, sometimes referred to as a ‘take-or-pay’ obligation, in terms of which the offtaker will pay a minimum amount per period, irrespective of whether he chooses to take delivery of the plant output or not. The take-or-pay amount is usually sized to be sufficient to cover the repayment of the capital cost of the project, using the project’s weighted average cost of capital.
The offtaker or its parent may provide guarantees to the project that it will meet its payment (and other) obligations.
Power plants are a good example of single-offtaker projects