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Origin Materials Reveals Customer Purchase Contract No Longer Binding
Footnote raises customer demand questions for plant based plastics maker.
May 16, 2023
New language in its latest quarterly filing suggests customer demand may be waning at Origin Materials (ORGN), a producer of plant-based PET plastic. In a footnote, Origin Materials disclosed a customer that had previously agreed to purchase a certain amount of product amended the contract in a way that:

“...eliminated the customer’s obligation to buy and the Company’s obligation to sell a specified annual amount of product…”.

Though the contractual amendment made on May 9, 2023 now allows the customer to purchase product from a third Origin production facility if the customer wishes, the change also appears to relieve the customer of the obligation to purchase product from Origin’s second line:

“The amendment also made the customer’s obligation to buy and the Company’s obligation to sell a specified annual amount of product from the Origin 2 facility non-binding unless and until the Company accepts a purchase order from the customer.”

In return, the footnote says Origin will no longer be obligated to pay penalties should it not meet certain construction and delivery milestones associated with its first and second production facilities.

Later in the filing, Origin added additional new language detailing its facility construction obligations to customers that can cancel or demand repayment of offtake agreements:

“These milestones have been deferred to 2023 in order to facilitate the negotiation of an amendment to the agreement, including the milestone achievement dates. As of the date hereof, the negotiation is ongoing.”

Discussions to amend this agreement are ongoing. Origin has previously amended agreements with other customers whose offtake agreements provided for liquidated damages and/or termination of the agreement in the event certain milestones were not met.”

In August 2022, Origin amended its offtake agreement with another customer which allowed Origin to eliminate the liquidated damages payable should the company not meet certain milestones related to the construction of its first production facility.

The company used $19 million in cash in the latest quarter and says it just started generating revenue.
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