Contracting for Supply
ZeoGas contracts to supply product on the basis of what is required by the project finance markets. The combination of a floor-price structure and off-taker credit rating creates the opportunity for investment grade commercial agreements on which ZeoGas can finance construction of the related purpose-built asset.
This structure also provides the off-taker significant, quantifiable value by:
- Locking in guaranteed supply volumes over a long tenor contract, eliminating the inefficiency of trying to secure product under the volatility of the spot market or short-tenor contracts
- Eliminates the raw exposure to crude market volatility, which translates into methanol, olefin and gasoline price volatility that can either not be easily transferred to the off-taker’s customers or causes extreme disruption when retail consumers have to absorb the volatility, as they due in the gasoline market
- The monetary value of the volatility spread – the had economics that makes so many trading firms very profitable – is instead “split” between the off-taker and ZeoGas
- The resulting contract allows ZeoGas to build and operate purpose-built assets for the off-taker, without the off-taker having to put the dedicated asset on their balance sheet.