Take-or-Pay

Take-or-pay is a contract structure in which a customer commits to pay for a fixed quantity of capacity or power whether or not it actually uses it. In data centers it appears in wholesale leases and power supply agreements: a tenant reserves, for example, 20 MW and pays for that reservation from a set date, with ramp schedules sometimes phasing the commitment over 12–36 months. Developers value take-or-pay because it converts uncertain demand into predictable revenue that lenders will finance against, which is why prelease deals with hyperscalers underpin most construction loans. Tenants trade flexibility for lower unit prices and guaranteed capacity in supply-constrained markets. Key terms to check are ramp timing, termination rights, and whether the commitment covers only capacity or also energy.