EXHIBIT 10.60

 

BLACK BEAUTY COAL COMPANY

LGE Contract # LGE02012

KU Contract # KUF02857

Amendment No. 1

 

AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT

 

THIS AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT (“Amendment No. 1”) is entered
into effective as of January 1, 2004, by and between LOUISVILLE GAS AND ELECTRIC
COMPANY (“LG&E”) and KENTUCKY UTILITIES COMPANY (“KU”), each a Kentucky
corporation, 220 West Main Street, Louisville, Kentucky 40202 (Buyer”), and
BLACK BEAUTY COAL COMPANY, an Indiana partnership, 414 South Fares Avenue,
Evansville, Indiana 47702, (“Seller”).

 

1.0 AMENDMENTS

 

The Agreement heretofore entered into by the parties, dated effective January 1,
2002 and identified by the Contract Numbers set forth above, is hereby amended
as follows. The January 1, 2002 Agreement and Amendment No. 1 is hereafter
referred to as the “Agreement”:

 

2.0 TERM

 

2.1                                 Section 2.0 Term, is deleted and replaced
with the following provision:

 

Term. The term of this Agreement shall commence on January 1, 2002 and shall
continue through December 31, 2007, subject to the price review set forth in §
8.1.

 

3.0 QUANTITY

 

3.1                                 Section 3.1 Base Quantity, is deleted and
replaced with the following provision:

 

3.1           Base Quantity. Seller shall sell and deliver and Buyer shall
purchase and accept delivery of the following annual quantities of coal:

 

YEAR

 

BASE QUANTITY (TONS)

 

 

 

 

 

2004

 

1,000,000

(1)

2005

 

1,000,000

(1)

2006

 

1,000,000

(2)

2007

 

1,000,000

(2)

 

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(1) Buyer will specify at Buyer’s sole option, a minimum of 500,000 tons of
Quality 1 up to a maximum of 700,000 tons of Quality 1. The remainder of the
Base Quantity shall be Quality 2.

(2) Pricing and Base Quantity subject to review set forth in § 8.1.

 

The Base Quantity will be delivered in approximately equal monthly quantities
and in accordance with a mutually agreed upon schedule.

 

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4.0          SOURCE

 

4.1                                 Section 4.1 Source is deleted and replaced
with the following provision:

 

Section 4.1 Source. The coal sold hereunder shall be supplied primarily from
geological seam Indiana #6 and #5, from Seller’s Somerville Mine Complex located
in Gibson County, Indiana (the “Coal Property”).

 

5.0          QUALITY

 

5.1                                 Section 6.1 Specifications is deleted and
replaced with the following provision:

 

Section 6.1 Specifications.

 

(a) The coal delivered hereunder shall conform to the following specifications
on an “as received” basis:

 

Guaranteed Monthly Specifications

 

Weighted Average (1)

 

Rejection Limits
(per shipment)

 

 

 

 

 

 

 

B.T.U./lb.

 

min. 11 000

 

<

 

10 700

 

 

 

 

 

 

 

 

 

CHLORINE

 

max. 0.03

 

>

 

0.04

 

FLUORINE

 

max. 0.005

 

>

 

0.006

 

NITROGEN

 

max. 1.40

 

>

 

1.50

 

 

 

 

 

 

 

 

 

ASH/SULFUR RATIO

 

min. 2.70:1

 

<

 

2.40:1

 

SIZE (3” x 0”):

 

 

 

 

 

 

 

Top size (inches)**

 

max. 3x0

 

>

 

3x0 

 

Fines (% by wgt)

 

 

 

 

 

 

 

Passing 1/4” screen

 

max. 40

 

>

 

50

 

 

 

 

 

 

 

 

 

BY WEIGHT:

 

 

 

 

 

 

 

VOLATILE

 

min. 32

 

<

 

30

 

FIXED CARBON

 

min. 40

 

<

 

38

 

GRINDABILITY (HGI)

 

min. 50

 

<

 

48

 

 

 

 

 

 

 

 

 

BASE ACID RATIO (B/A)

 

.55

 

>

 

.60

 

 

 

 

 

 

 

 

 

SLAGGING FACTOR***

 

max. 2.40

 

>

 

2.60

 

FOULING FACTOR****

 

max. .35

 

>

 

.40

 

 

 

 

 

 

 

 

 

ASH FUSION TEMPERATURE (°F) (ASTM D1857)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REDUCING ATMOSPHERE

 

 

 

 

 

 

 

Initial Deformation

 

min. 2000

 

min.

 

1925

 

Softening (H=W)

 

min. 2025

 

min.

 

1990

 

Softening (H=1/2W)

 

min. 2050

 

min.

 

2025

 

Fluid

 

min. 2125

 

min.

 

2100

 

 

 

 

 

 

 

 

 

OXIDIZING ATMOSPHERE

 

 

 

 

 

 

 

Initial Deformation

 

min.

 

min.

 

 

 

Softening (H=W)

 

min.

 

min.

 

 

 

Softening (H=1/2W)

 

min.

 

min.

 

 

 

Fluid

 

min.

 

min.

 

 

 

 

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(1)          An actual Monthly Weighted Average will be calculated for each
specification for coal delivered to the Louisville Gas and Electric generating
stations and a separate actual Monthly Weighted Average will be calculated for
each specification for coal delivered to the Kentucky Utility generating
stations.

 

**  All the coal will be of such size that it will pass through a screen having
circular perforations three (3) inches in diameter, but shall not contain more
than fifty per cent (50%) by weight of coal that will pass through a screen
having circular perforations one-quarter (1/4) of an inch in diameter.

 

***                           Slagging Factor (Rs)=(B/A) x (Percent Sulfur by
WeightDry)
Fouling Factor (Rf)=(B/A) x (Percent Na20 by WeightDry)

 

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The Base Acid Ratio (B/A) is herein defined as:

BASE ACID RATIO (B/A) =

 

(Fe2O3 + CaO + MgO + Na2O + K2O

 

 

 

(Si02 + A1203 + Ti02)

 

 

Note: As used herein

 

>

 

means greater than:

 

 

<

 

means less than.

 

b) In addition to the specifications set forth in § 6.1(a), the coal delivered
hereunder designated as Quality 1 shall conform on an “as received” basis to the
following specifications:

 

QUALITY 1 (1)

 

Specifications

 

Guaranteed Monthly
Weighted Average (2)

 

Rejection Limits
(per shipment)

 

 

 

 

 

lbs./MMB.T.U.

 

 

 

 

Sulfur

 

max.

 3.00

 

 

 

> 3.25

Ash

 

max.

10.50

 

 

 

> 11.10

Moisture

 

max.

13.0

 

 

 

> 14.10

 

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(1) Buyer will specify on a monthly basis, the qualities (Quality 1 and/or
Quality 2) that are to be delivered during a calendar month, no later than
twenty (20) days prior to the start of that month. During any calendar year
during the term of this Agreement, Buyer shall specify on an annual basis, an
annual total of at least 500,000 tons and a maximum of 700,000 tons of the base
quantity tons for that calendar year as Quality 1. The remainder of the base
quantity tons shall be Quality 2.

 

(2) An actual Monthly Weighted Average will be calculated for each specification
for coal delivered to the Louisville Gas and Electric generating stations and a
separate actual Monthly Weighted Average will be calculated for each
specification for coal delivered to the Kentucky Utility generating stations.

 

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(c) In addition to the specifications set forth in § 6.1(a), the coal delivered
hereunder designated as Quality 2 shall conform on an “as received” basis to the
following specifications:

 

QUALITY 2 (1)

 

Specifications

 

Guaranteed Monthly
Weighted Average (2)

 

Rejection Limits
(per shipment)

 

 

 

 

 

lbs./MMB.T.U.

 

 

 

 

Sulfur

 

max.

 3.20

 

 

 

> 3.50

Ash

 

max.

10.70

 

 

 

> 11.50

Moisture

 

max.

12.50

 

 

 

> 13.45

 

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(1) Buyer will specify on a monthly basis, the qualities (Quality 1 and/or
Quality 2) that are to be delivered during a calendar month, no later than
twenty (20) days prior to the start of that month. During any calendar year
during the term of this Agreement, Buyer shall specify on an annual basis, an
annual total of at least 500,000 tons and a maximum of 700,000 tons of the base
quantity tons for that calendar year as Quality 1. The remainder of the base
quantity tons shall be Quality 2.

 

(2) An actual Monthly Weighted Average will be calculated for each specification
for coal delivered to the Louisville Gas and Electric generating stations and a
separate actual Monthly Weighted Average will be calculated for each
specification for coal delivered to the Kentucky Utility generating stations.

 

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5.2                                 Section 6.4 Suspension and Termination is
deleted and replaced with the following provision:

 

If the coal sold hereunder fails to meet one (1) or more of the Guaranteed
Monthly Weighted Averages set forth in § 6.1 (as to either or both of LG&E or
KU) for any two (2) consecutive months or a total of three (3) months in a six
(6) month period, or if six (6) barge shipments in a thirty (30) day period are
rejectable by Buyer, or if Buyer receives at generating station(s) two (2) rail
shipments which are rejectable in any thirty (30) day period, then Buyer may
upon notice confirmed in writing and sent to Seller by certified mail, suspend
future shipments except shipments already loaded into barges and/or railcars.
Seller shall, within ten (10) days, provide Buyer with reasonable assurances
that subsequent monthly deliveries of coal shall meet or exceed the Guaranteed
Monthly Weighted Averages set forth in § 6.1. If Seller fails to provide such
assurances within said ten (10) day period, Buyer may terminate this Agreement
by giving written notice of such termination at the end of the ten (10) day
period. A waiver of this right for any one (1) period by Buyer shall not
constitute a waiver for subsequent periods. If Seller provides such assurances
to Buyer’s reasonable satisfaction, shipments hereunder shall resume and any
tonnage deficiencies resulting from suspension may be made up at Buyer’s sole
option. Buyer shall not unreasonably withhold its acceptance of Seller’s
assurances, or delay the resumption of shipment. If Seller, after providing such
assurances, fails to meet any of the Guaranteed Monthly Weighted Averages (as to
either LG&E or KU) for any one (1) month within the next six (6) months or if
three (3) barge shipments or one (1) rail shipment are rejectable within any one
(1) month during such six (6) month period, then Buyer may terminate this
Agreement and exercise all its other rights and remedies under applicable law
and in equity for Seller’s breach.

 

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6.0                               PRICE

 

6.1                                 Section 8.1 Base Price is deleted and
replaced with the following provision:

 

8.1 Base Price. The base price (“Base Price”) of the coal to be sold hereunder
will be firm and will be based on $/MMBtu and will be determined by the year in
which the coal is delivered as defined in § 5 in accordance with the following
schedule:

 

BASE PRICE—QUALITY 1

 

YEAR

 

($ Per MMBTU)

 

($ Per Ton)

 

 

 

 

 

2004

 

$.96591 F.O.B. Railcar

 

$21.25 F.O.B. Railcar

 

 

$1.1477 F.O.B. Barge

 

$25.25 F.O.B. Barge

 

 

 

 

 

2005

 

$.96591 F.O.B. Railcar

 

$21.25 F.O.B. Railcar

 

 

$1.1477 F.O.B. Barge

 

$25.25 F.O.B. Barge

 

 

 

 

 

2006

 

*

 

*

 

 

 

 

 

2007

 

*

 

*

 

BASE PRICE—QUALITY 2

 

YEAR

 

($ Per MMBTU)

 

($ Per Ton)

 

 

 

 

 

2004

 

$1.0568 F.O.B. Barge

 

$23.25 F.O.B. Barge

 

 

 

 

 

2005

 

$1.0568 F.O.B. Barge

 

$23.25 F.O.B. Barge

 

 

 

 

 

2006

 

 

 

 

 

 

 

 

 

2007

 

 

 

 

 

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* Buyer and Seller will begin negotiations on price, quantity and other terms
and conditions on or before June 1, 2005 for prices and quantities to be
effective during the years 2006 and 2007. The parties then shall attempt to
negotiate on new prices, quantities and/other terms and conditions between June
1, 2005 and August 1, 2005. If the parties do not reach an agreement by August
1, 2005, then this Agreement will terminate as of December 31, 2005 without
liability due to such termination for either party. Notwithstanding anything
herein to the contrary, the Base Price and Base Quantity set forth herein for
the years 2006 and 2007 are for use as reference points for the negotiations
described in this paragraph and the parties do not intend to be bound by any
terms and conditions relating to the years 2006 and 2007 (including Base Price
and Base Quantity) unless and until the parties reach a mutually acceptable
agreement by August 1, 2005 and execute a written amendment expressly setting
forth the Base Price, Base Quantity and any other terms and conditions agreed to
for 2006 and 2007. This clause shall not be interpreted as a Right of First
Refusal or exclusive supply agreement.

 

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6.2                                 Section 8.2(b) is deleted and replaced with
the following provision:

 

8.2 (b)               Notwithstanding the foregoing, for each specification,
there shall be no discount if the actual Monthly Weighted Average meets the
applicable Discount Point set forth below. Actual Monthly Weighted Averages will
be separately calculated for the Louisville Gas and Electric generating stations
and for the Kentucky Utility generating stations. However, if the actual Monthly
Weighted Average for the Louisville Gas and Electric generating stations and/or
the Kentucky Utility generating stations fail to meet such applicable Discount
Point, then the discount shall apply to and shall be calculated on the basis of
the difference between the actual Monthly Weighted Average and the Guaranteed
Monthly Weighted Average pursuant to the methodology shown in Exhibit A attached
hereto. The discount will be applied only to the particular company whose actual
Monthly Weighted Average failed to meet the Discount Points.

 

QUALITY 1

 

Guaranteed Monthly Weighted Average

 

Discount Point

 

 

 

 

 

BTU

 

Min. 11,000 BTU/LB

 

10,850 BTU/LB

 

 

 

 

 

ASH

 

Max. 10.50 LB/MMBTU

 

10.80 LB/MMBTU

 

 

 

 

 

MOISTURE

 

Max. 13.00 LB/MMBTU

 

13.50 LB/MMBTU

 

 

 

 

 

SULFUR

 

Max. 3.00 LB/MMBTU

 

3.05 LB/MMBTU

 

 

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QUALITY 2

 

Guaranteed Monthly Weighted Average

 

Discount Point

 

 

 

 

 

BTU

 

Min. 11,000 BTU/LB

 

10,850 BTU/LB

 

 

 

 

 

ASH

 

Max. 10.70 LB/MMBTU

 

11.10 LB/MMBTU

 

 

 

 

 

MOISTURE

 

Max. 12.50 LB/MMBTU

 

12.95 LB/MMBTU

 

 

 

 

 

SULFUR

 

Max. 3.20 LB/MMBTU

 

3.30 LB/MMBTU

 

For example, if the actual Monthly Weighted Average of ash (For Quality 1)
equals 11.20 lb/MMBTU, then the applicable discount would be (I 1.201b. -
10.501b.) X .0083/lb/MMBTU = $.00581/MMBTU.

 

7.0 CREDIT RATING

 

7.1                                 Section 21.0 CREDIT RATING is added as
follows.

 

SECTION 21.0     CREDIT RATING

 

If the Credit Rating (as defined below) of either Buyer (if Buyer has a public
rating) falls below Investment Grade Rating (as defined below), Buyer shall,
within five (5) days after Seller’s written request, provide Seller with a
mutually agreed upon form of credit enhancement (e.g., letter of credit,
guaranty from an investment grade entity, etc.). If no such form of credit
enhancement is received by Seller, then Seller has the right to require payment
in cash at the time of delivery. Such mutually acceptable assurances of good
credit shall not be more than the average monthly outstanding net balance.

 

“Credit Rating” means, with respect to any entity, the rating then assigned to
such entity’s unsecured, senior long-term debt obligations (not supported by
third party credit enhancements) or if such entity does not have a rating for
its senior unsecured long-term debt, then the rating then assigned to such
entity as an issues rating by S&P, Moody’s or any other rating agency agreed by
the Parties as set forth in the Cover Sheet.

 

“Investment Grade Rating” shall mean a party’s unsecured, senior long-term debt
obligations (not supported by third party credit enhancements) rating from
Moody’s of “Baa3” or higher and a rating from S&P of “BBB-” or higher. Moody’s
shall mean Moody’s Investor Services, Inc. or its successors. S&P shall mean the
Standard & Poor’s Rating Group (a division of McGraw-Hill Inc.) or its
successors.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Amendment No. 1 on the
day and year below written, but effective as of the day and year first set forth
above.

 

 

LOUISVILLE GAS AND ELECTRIC
COMPANY

BLACK BEAUTY COAL COMPANY

 

 

BY:

 

 

BY:

 

 

 

Paul Thompson

 

 

SVP - Energy Services

TITLE:

 

 

 

 

DATE:

 

 

DATE:

 

 

 

 

 

 

KENTUCKY UTILITIES COMPANY

 

 

 

By:

 

 

 

 

 

 

Paul Thompson

 

 

SVP - Energy Services

 

 

 

 

 

Date:

 

 

 

 

 

 

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