Documentation Process
Alchemie Energy positions itself between the Buyer and the Seller as the Party that has sourced the Commodity and found the Buyer, and may include transaction financing. Alchemie Energy puts in place the following contracts:
- Locks itself into the buyer and the seller with a confidentiality and non-circumvention agreement.
- Puts in place an intermediary party contract that guarantees Alchemie Energy’s fees from the buyer and the Seller.
- Puts in place a supply contract between the Buyer, the Seller and Alchemie Energy.
The standard sequence of document exchange varies depending on whether the situation is for a long term contract or a spot purchase. For a spot purchase the documentation process is standardized according to ICC procedures, including the main following stages:
Alchemie Energy agrees remuneration, confidentiality and non-circumvention with its Associate’s in contract form.
Alchemie Energy negotiates with the Seller, where possible, the terms and conditions of sale including the sales price, discounting, remuneration and documentary process.
Alchemie Energy negotiates with the potential buyer’s intermediaries and potential buyer the general terms of trade including the sales price, remuneration and documentary process.
Alchemie Energy agrees remuneration, confidentiality and non-circumvention with the other intermediaries in contract form.
Alchemie Energy agrees remuneration, confidentiality and non-circumvention with the Buyer in contract form.
Alchemie Energy agrees remuneration, confidentiality and non-circumvention with the Seller in contract form.
Alchemie Energy makes sure the supply contract is signed in the electronic form and exchanged by the Parties. This contract where possible will include Alchemie Energy as a signatory and will state clearly the remuneration fees.
After completing the above, the parties start the document exchange process as per ICC standard terms of supply for petrochemicals, which will include the following main stages:
The Parties present the contract to their bankers.
The Buyers bankers send a SWIFT or equivalent electronic protocol message, on behalf of the Buyer, to the Seller’s bank confirming that the Buyer has the financial capability to pay for the total value of the Commodity specified in this Contract.
After the Seller’s bank receives the Buyer’s banks communication, the Seller’s Bank transmits by SWIFT MT199, or equivalent electronic protocol, a message confirming that Sellers bank is in possession of all documents showing Proof of Product as per the signed contract.
The Buyers bank upon receiving the Sellers’s bankers SWIFT or equivalent electronic protocol messages confirms via a SWIFT MT799, or equivalent electronic protocol, that the Buyer’s bankers have blocked a specific value of the Buyers funds for the purchase of the Commodity as per the contract.
The Seller’s Bank releases a full copy of the documents showing Proof of Product as per the signed contract.
The Buyer’s bankers issue the payment by electronic transfer to the Seller and the Agent based on the Price and Agents remuneration as per the contract.
Upon receipt by the Seller’s bankers of the Buyer’s payment the Seller forwards to the Buyer the originals of the documents showing Proof of Product.
Terms for a long term supply contract are normally negotiated in much greater detail and over much longer lead times with the Buyer and very often may include involvement of extra financial mechanisms, such as bank guarantees, revolving Letters of credits, performance bonds etc.