<PAGE>

                                                                  EXHIBIT 10.21

This contract cancels and supersedes previous contract with (name, date, 
contract number): Amended Agreement for Electric Service between Lone Star 
Steel Company and SWEPCO, dated October 1, 1976
-------------------------------------------------------------------------------

FORM 702-T          Southwestern Electric Power Company
-----------------      CONTRACT FOR ELECTRIC SERVICE
 CONTRACT NUMBER
     42827                         Texas
-----------------

Lone Star Steel Company, P.O. Box 1000, Hwy. 259 South, Lone Star, Texas 
75668-1000 hereinafter called "Customer", and Southwestern Electric Power 
Company, hereinafter called "Company", enter into the following contract:

     The Company will sell and deliver to the the Customer at SWEPCO's Lone 
Star South Substation located along Highway 259 South near Lone Star, Texas 
and the Customer will receive and pay for electric service for a period of 10 
years beginning the later of October 1, 1996, or approval by the 
Commission(1), and thereafter, in automatically recurring yearly periods, (2) 
terminated by (3) prior written notice from either party to the other. 
Electric service will be delivered and received hereunder in accordance with 
the standard Terms and Conditions which are printed on the reverse side 
hereof and made a part of this contract, and Customer agrees to observe and 
be bound by them.

     Electric service delivered by the Company to the Customer will be 3 wire 
3 phase, 60 cycle, alternating current at a nominal voltage of 138,000, in 
the amount of approximately 120,000 kilowatts, and will be metered at 138,000 
volts.

     The Customer will use such electric service in the operation of Steel 
Mill and will be billed and will pay for this service in accordance with the 
rate schedule attached to this contract and made a part hereof.

     The following rate schedule and any special terms are applicable to this 
contract: Contract with Lone Star Steel Company (LSS); Attachment to the 
Contract for Electric Service between Lone Star Steel Company and 
Southwestern Electric Power Company.

     In consideration of the investment on the part of the Company to make 
electric service available under this contract, the minimum monthly billing 
provision of the aforementioned rate schedule applies, but will not be less 
than the charge for 40,000(4) kw plus the fuel and tax adjustment clauses 
provided in the rate schedule.

     In the event a new or revised rate schedule applicable to service under 
this contract is authorized and made effective by the duly constituted 
regulatory authority or authorities having jurisdiction in the premises, 
which said rate schedule supersedes or modifies the rate schedule which is 
attached to this contract or printed on the reverse side hereof, then from 
and after the date upon which said new or revised rate schedule becomes 
authorized and effective, electric service to Customer will be billed and 
Customer will pay for such service in accordance with such new or revised 
rate schedule.

     If Customer fails to perform any of his obligations under this contract, 
including the prompt payment of monthly bills, or fails to observe or comply 
with any of the Terms and Conditions as printed on the reverse side of this 
sheet, the Company may suspend delivery of electric service and will not be 
liable in any manner for loss or damage arising through such suspension.  No 
such suspension will interfere with the enforcement by the Company of any 
other legal right or remedy nor relieve the Customer from liability to pay 
the minimum charge during any suspension.  No delay by the Company in 
enforcing any of its rights hereunder will be deemed a waiver of such rights 
nor will waiver by the Company of any default by Customer be deemed a waiver 
of any other or subsequent default.

     The Customer will indemnify and save the Company harmless from all loss 
on account of injury, or damage to persons or property on the Customer's 
premises, and at and from the point of delivery of power if such point is 
located off the Customer's premises, growing out of any accident or mishap.

     This agreement may be assigned by the Customer only with the written 
consent of the Company.  This contract will bind and benefit the successors 
and assigns of the Company, and, at the option of the Company, the 
successors and assigns of the Customer.  This contract supersedes all prior 
agreements between the Customer and the Company for the service specified 
herein.

     In witness whereof, the parties hereto have caused this contract to be 
executed on (X) September 30, 1996.

<TABLE>
<S>                                                 <C>
                                                 Lone Star Steel Company
                                                 ---------------------------------------------------------
                                                                      Customer

Witness (X) Barbara J. Griffin                   By (X) John G. Shivers
       ------------------------------------        -------------------------------------------------------
              (For the Customer)

                                                    (X) Vice President, Engineering & Services
                                                 ---------------------------------------------------------
                                                                  Official Capacity

                                                 SOUTHWESTERN ELECTRIC POWER COMPANY

Witness  Andrew Rambin                           By  Millard D. Smith
       ------------------------------------        -------------------------------------------------------
              (For the Company)

1. See Attachment, Article VII
2. At any time during its term, this             /X/ President   / / Vice President  / / Division Manager
   Agreement may be                              ---------------------------------------------------------
3. Twenty-Four Months                                                  Official Capacity
4. See Attachment, Article I.
</TABLE>
<PAGE>
                                       
                         STANDARD TERMS AND CONDITIONS

--------------------------------------------------------------------------------
                                       
               1.  APPLICABLE TO ALL CLASSES OF ELECTRIC SERVICE
               -------------------------------------------------

     In order that all Customers may receive uniform, efficient, and 
     adequate service, electric service will be supplied to and accepted 
     by all Customers receiving service from the Company in accordance 
     with these Terms and Conditions.
                                       
                             2.  ORDER FOR SERVICE
                             ---------------------

     Contract and Agreement For Electric Service Form CA-101 and other 
     applicable Contract For Electric Service forms are provided by the 
     Company to show the agreement under which the Customer receives and 
     the Company delivers electric service. Appropriate arrangements 
     will be completed with Customer, or his duly-authorized agent, 
     before service is supplied by the Company. A separate contract will 
     be in effect for each class of service at each separate location. 
     Refusal of service by the Company is governed by the Company's 
     Service Refusal Policy, Sheet No. 101.
                                       
                               3.  OPTIONAL RATES
                               ------------------

     The Company's published rate schedules state the conditions under 
     which each is available for electric service. When two or more 
     rates are applicable to a certain class of service, the choice of 
     such rates lies with the Customer.

     The Company, at any time upon request, will determine for any 
     Customer the rate best adapted to existing or anticipated service 
     requirements as defined by the Customer, but the Company does not 
     assume responsibility for the selection of such rate or for the 
     continuance of the lowest annual cost under the rate selected.

     The Company, lacking knowledge of changes that may occur at any 
     time in the Customer's operating conditions, does not assume 
     responsibility that Customer will be served under the most 
     favorable rate; nor will the Company make refunds covering the 
     difference between the charges under the rate in effect and those 
     under any other rate applicable to the same service.

     Rates are normally established on a twelve-month basis and a 
     Customer having selected a rate adapted to his service may not 
     change to another rate within a twelve-month period unless there is 
     a substantial change in the character or conditions of his service. 
     A new Customer will be given reasonable opportunity to determine 
     his service requirements before definitely selecting the most 
     favorable rate therefor.
                                       
                                 4.  DEPOSIT
                                 -----------

     The Customer, if requested by the Company to do so, will make and 
     maintain a reasonable deposit to secure payment of bills. Rules and

<PAGE>

     regulations governing the requirement for and refundability of 
     deposits are contained in the Company's Deposit Policy, Sheet 
     No. 102.
                                       
                               5.  MONTHLY BILLS
                               -----------------

        Bills for service will be rendered monthly, unless otherwise 
     specified. The term "month" for billing purposes will mean the 
     period between any two consecutive readings of the meters by the 
     Company, such readings to be taken as nearly as practicable every 
     thirty days.

        Failure to receive a bill in no way exempts Customers from payment 
     for electric service.

        When there is good reason for doing so, estimated bills may be 
     submitted provided that an actual meter reading is taken every six 
     (6) months. In months when the meter reader is unable to gain 
     access to the premises to read the meter on regular meter-reading 
     trips, or in months when meters are not read, Company will provide 
     the Customer with a postcard and request the Customer to read the 
     meter and return the card to Company. If such postcard is not 
     received by Company in time for billing, Company may estimate meter 
     reading and render bill accordingly.


<PAGE>
                                       
     When a bill rendered to a Commercial or Industrial Customer is paid after 
the due date, a one-time penalty in an amount set forth in the applicable rate 
schedule will be added to the amount owed the Company.
                                       
                         6.  DISCONTINUANCE OF SERVICE
                         -----------------------------

     A customer's utility service may be disconnected and the Company's 
property removed from the Customer's premises if the bill has not been paid by 
the due date and proper notice has been given in accordance with the Company's 
Collection and Disconnect Policy, Sheet No. 103. No such suspension of 
electric service will interfere with the enforcement by the Company of any 
other legal right or remedy nor relieve the Customer from liability to pay the 
minimum charge during any suspension. No delay by the Company in enforcing any 
of its rights will be deemed a waiver of such rights nor will waiver by the 
Company of any default by the Customer be deemed a waiver of any other 
subsequent default.
                                       
               7.  EXCLUSIVE SERVICE ON INSTALLATION CONNECTED TO
               --------------------------------------------------
                               COMPANY'S SYSTEM
                               ----------------

     Except as may be specifically permitted under tariffs governing the 
interconnection or provision of service to small power producers or 
cogenerators, standard electric rate schedules are based on exclusive use of 
Company's service.

     Except in cases where the Customer has a contract with the Company for 
breakdown or standby service, no other electric light or power service will

<PAGE>

be used by the Customer on the same installation in conjunction with the 
Company's service, either by means of a throw-over switch or any other 
connection.

     The Company will not be required to supply or continue to supply service 
to any Customer where a portion of Customer's service requirement is obtained 
from other sources, except when such service is covered by a contract under 
Standby Service Schedule (S).

     The Customer will not sell the electricity purchased from the Company to 
any other customer, company, or person, and Customer will not deliver 
electricity purchased from the Company to any connection wherein said 
electricity is to be used off of the Customer's premises on which the meter 
is located.
                                       
                          8.  CUSTOMER'S INSTALLATION
                          ---------------------------

     Customer is responsible for installing and maintaining such protective 
devices as are recommended or required by the then current edition of the 
National Electrical Code or as may be necessary to protect Customer's 
equipment or process during abnormal service conditions or the failure of all 
or a part of the electric service provided by the Company. All wiring and 
other electrical equipment furnished by the Customer will be installed, 
operated, and maintained by the Customer at all times in conformity with good 
electrical practice and with the requirements of the constituted authorities 
and these Terms and Conditions. Where no public authorities have jurisdiction, 
Company, for Customer's protection, may require Customer to furnish Company a 
certificate from wiring electrician that Customer's installation conforms to 
the National Electrical Code and/or the National Electrical Safety Code. The 
Company does not assume responsibility for the design, operation, or condition 
of the Customer's installation.

     Service will be delivered to Customer for each premise at one point of 
delivery to be designated by Company and to conform to Company's service 
standards. For mutual protection of Customer and Company, only authorized 
employees of Company are permitted to make and energize the connection between 
Company's service wire and Customer's service entrance conductors. The 
Customer will indemnify and save the Company harmless from all loss on account 
of injury or damage to persons or property on the Customer's premises, and at 
and from the point of delivery of power if such point is located off the 
Customer's premises, growing out of any accident or mishap.

<PAGE>
                                       
                         9.  OWNER'S CONSENT TO OCCUPY
                         -----------------------------

     The Company shall have the right to install and maintain equipment in, 
over and under the Customer's property and shall have access to the Customer's 
premises for any other purpose necessary for supplying electric service to the 
Customer. In case the Customer is not the owner of the premises or of the 
intervening property between the premises and the Company's lines, the 
Customer will obtain from the property owner or owners the easements or 
right-of-way necessary to install and maintain in, over or under said premises 
all such wires and electrical equipment as are necessary or convenient for 
supplying electric service to the Customer.
                                       
                           10.  MOTOR INSTALLATIONS
                           ------------------------

     For mutual protection of service to all customers, all motor 
installations will be as follows:

     (a) All motors rated in horsepower up to and including 7-1/2 HP and 
individual air conditioning units with ratings of 65,000 BTUH (ARI rating) or 
less will be single phase, unless otherwise agreed to by the Company or served 
in conjunction with other larger three phase loads.

     (b) All three phase motors will be equipped with approved starting 
equipment having low voltage release attachment and properly sized 
over-current protection in each of the three phases.
                                       
                               11.  POWER FACTOR
                               -----------------

     Where Customer has power or heating equipment installed that operates at 
low power factor, Customer will furnish, at his own expense, suitable 
corrective equipment to maintain a power factor of 90% lagging, or higher.

     Customer will install and maintain in conjunction with any fluorescent 
lighting, neon lighting, or other lighting equipment having similar load 
characteristics, auxiliary or other corrective apparatus that will correct the 
power factor of such lighting equipment to not less than 90% lagging.
                                       
                         12.  PROTECTION OF SERVICE
                         --------------------------

     Where the Customer's use of any devices that have a detrimental effect 
upon the service rendered to other Customers or upon Company equipment and 
causes voltage fluctuation of the 60 Hertz wave, clipping of the current, or 
voltage wave - thereby producing harmonics or a cyclic pulsation between one 
and sixty Hertz (1 and 60 Hertz), Customer will furnish at his own expense 
necessary equipment to limit such voltage fluctuation, harmonics, or 
pulsations so that they will not interfere with other Customers or Company

<PAGE>

equipment. Where the interference cannot be corrected, the use of such 
devices must be discontinued.

                        13.  CONTINUOUS SERVICE
                        -----------------------

     Company will make reasonable provisions to insure satisfactory and 
continuous service, but does not guarantee a continuous supply of electric 
energy or that the voltage, wave form or frequency of the supply will not 
fluctuate. The Company shall not be liable for damages occasioned by 
interruption, failure to commence delivery, or voltage, wave form or frequency 
fluctuation caused by interruption or failure of service or delay in 
commencing service due to accident to or breakdown of plant, lines, or 
equipment, strike, riot, act of God, order of any court or judge granted in 
any bonafide adverse legal proceedings or action or any order of any 
commission or tribunal having jurisdiction; or, without limitation by the 
preceding enumeration, any other act or things due to causes beyond its 
control, to the negligence of the Company, its employees, or contractors, 
except to the extent that the damages are occasioned by the gross negligence 
or willful misconduct of the Company.

     In like manner, should the Customer's premises be rendered wholly unfit 
for the continued operation of the Customer's plant or business, due to any of 
the causes mentioned above, the Customer's contract, if any, will thereupon be 
suspended until such time as the plant or premises will have been 
reconstructed, reconditioned, and reoccupied by the Customer for the purpose of 
his business.

                 14.  INTENTIONAL INTERRUPTION OF SERVICE
                 ----------------------------------------

     The Company may without notice and without liability to Customer 
interrupt service to Customer when in the Company's sole judgment such 
interruption:

     (a)  Will prevent or alleviate an emergency threatening to disrupt the 
          operation of the Company's system; or

     (b)  Will lessen or remove possible danger to life or property; or

     (c)  Will aid in the restoration of electric service; or

     (d)  Is required to make necessary repairs to or changes in the Company's 
          facilities.

<PAGE>

Customer may request, in writing, that Company provide notice of intentional 
interruption of service by contact at an address and telephone number provided 
in such written request by Customer and Company will exercise reasonable 
diligence to give such notice but does not warrant that notice will be given 
in every case of intentional interruption.

                              15.  METERING
                              -------------

     The electricity used will be measured by a meter or meters to be 
furnished and installed by the Company at its expense and bills will be 
calculated upon the registration of such meters. Meters include all measuring 
instruments. Meter installations will be made in accordance with the service 
standards set forth in the Company's Meter and Service Installations 
Handbook. Customer will provide a sufficient and proper space in a clean and 
safe place, accessible at all times and free from vibration, for the 
installation of Company's meters. Company will furnish all meter bases 
and/or metering enclosures to be installed by Customer on supply side of 
service equipment to be metered.

     Meters will be tested as reasonably necessary in accordance with the 
Company's Meter Testing Policy, Sheet No. 104.

      16.  PROTECTION OF COMPANY'S PROPERTY AND ACCESS TO PREMISES
      ------------------------------------------------------------

     The Customer will protect the Company's property on the Customer's 
premises from loss or damage and will permit no one who is not an agent of 
the Company to remove or tamper with the Company's property.

     The Company will have the right of access to the Customer's premises at 
all reasonable times for the purpose of installing, reading, inspecting, or 
repairing any meters or devices owned by Company or for the purpose of 
removing its property.

                 17.  AGENTS CANNOT MODIFY AGREEMENT
                 -----------------------------------

     No agent has power to amend, modify, or waive any of these Terms and 
Conditions, or to bind the Company by making any promises or representations 
not contained herein.

             18.  SUPERSEDE PREVIOUS TERMS AND CONDITIONS
             --------------------------------------------

     These Terms and Conditions supersede all Terms and Conditions under which 
the Company has previously supplied electric service.

<PAGE>

                              ATTACHMENT TO THE
                       CONTRACT FOR ELECTRIC SERVICE
                                   BETWEEN
                           LONE STAR STEEL COMPANY
                                     AND
                    SOUTHWESTERN ELECTRIC POWER COMPANY


     This Attachment appended to and made a part of the Contract for Electric 
Service (Contract) between Lone Star Steel Company ("Lone Star") and 
Southwestern Electric Power Company ("SWEPCO"), dated September 30, 1996.


                                   I. Rates
                                      -----

     Lone Star will be billed for and will pay for electric service hereunder 
in accordance with Rate Schedule LSS of SWEPCO's Manual of Tariffs, as 
approved from time-to-time by the Public Utility Commission of Texas 
("Commission").  The current version of Rate Schedule LSS is attached to the 
Contract.  If the Commission revises or supersedes Rate Schedule LSS, the 
attached rate schedule will be revised accordingly, and the revised or 
superseded schedule will apply to service hereunder from the date it is made 
effective by the Commission.

     The Minimum Kilowatts of Billing Demand will be determined pursuant to 
the provisions of Rate Schedule LSS.  In the event Lone Star decreases its 
specified Firm Load pursuant to Section I.B.1 of Rate Schedule LSS, it is 
agreed that for billing purposes, such a decrease shall not reduce the amount 
of Firm Load by more than 20 percent when used in allocating Kilowatts of 
Billing Demand among Firm Load, Curtailable Load, and Off-Peak Load for the 
subsequent 12-month period.

<PAGE>

     Lone Star may elect to take service under any other Rate Schedule or 
tariff provision in SWEPCO's Manual of Tariffs, as approved from time-to-time 
by the Commission, that by its terms indicates it is available to a customer 
served under Rate Schedule LSS or under any Commission-approved tariff that 
supersedes Rate Schedule LSS.  In the event Lone Star elects to take service 
under such other applicable Rate Schedule or tariff provision approved by the 
Commission, the attached rate schedule will be revised as appropriate, and 
the Contract modified appropriately.


                         II.  Availability of Power
                              ---------------------

     SWEPCO currently has three sources of supply to the Lone Star South 
Substation and will make reasonable effort to maintain two-way service to the 
Lone Star South Substation.  SWEPCO's obligation under the Contract to 
provide electric power is limited to the following aggregate levels:

-------------------------------------------------------------------------------
                                                    Lone Star      Lone Star
Based on SWEPCO 1997 Summer Projected Peak Load        87%            98%
Flows
                                                    Power Factor   Power Factor
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Normal System Conditions                              200 MW         235 MW
-------------------------------------------------------------------------------
One Transmission Line to the Lone Star South          140 MW         160 MW
Substation Out of Service
-------------------------------------------------------------------------------
One Autotransformer at the Diana Substation Out of    115 MW         115 MW
Service*
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
     *Should one autotransformer at the Diana Substation fail, SWEPCO will 
      make a reasonable effort to install a spare autotransformer within 30 
      days.

SWEPCO will reasonably notify Lone Star should SWEPCO's projections of 
customer demands indicate that any significant changes in these limits are 
expected to occur.


<PAGE>

     In the event Lone Star notifies SWEPCO that Lone Star's needs are 
projected to exceed the levels set forth above, SWEPCO will consult with Lone 
Star with respect to the installation of additions or modifications to 
SWEPCO's system and the terms and conditions upon which such additions or 
modifications will be installed.  Installation of any such additions or 
modifications will be contingent on: (i) receipt of all required permits and 
approvals; (ii) availability of materials and rights-of-way; and (iii) 
Commission approval of any compensation from Lone Star to SWEPCO for Lone 
Star's reasonably apportioned share of the cost of the additions or 
modifications installed.  At this time, SWEPCO has no plans for construction 
of additions or modifications to its system for which Lone Star would be 
expected to share the cost.

     To assist in SWEPCO's planning, Lone Star will provide SWEPCO a written 
load forecast for a minimum of three calendar years by March 1 of each year.  
Lone Star shall use its best efforts to inform SWEPCO as soon as possible of 
any substantial changes in these forecasts.


               III.  Limitation of Amount of Curtailable Load
                     ----------------------------------------

     Due to Lone Star's and other customers' potential for load growth, 
Curtailable Load shall be provided consistent with transmission system 
delivery capability, including but not limited to the limitations set forth 
in Section II above.  The amount of Curtailable Load available will change 
from time to time and shall be specified by SWEPCO.  A limited amount of 
Curtailable Load is available to all SWEPCO customers.  Curtailable Load 
available to Lone Star shall be 120,000 kilowatts subject to the following: 
(1) In the event Lone Star's use of Curtailable Load does not exceed 90,000 
kilowatts at any time prior to June 1, 1997, or during any three-year period

<PAGE>

thereafter, SWEPCO shall have the right to make any Curtailable Load or 
interruptible power in excess of 10,000 kilowatts over the highest prior 
usage of Curtailable Load by Lone Star available to other customers; and 
(2) SWEPCO shall allow the use of more Curtailable Load to the extent it
deems such allowance consistent with its system's demands and capability.


                                IV.  Metering
                                     --------

     The kilowatt-hours associated with each type of load shall be determined 
by one set of electronic metering.  In the event of a failure in metering, 
billing shall be estimated on the best information available or Lone Star's 
metering.  Metering equipment shall be tested at intervals not exceeding one  
year with a representative of each party present.  If as a result of such 
tests the metering equipment is found to be inaccurate, it shall be restored 
to a condition of accuracy.  If inaccuracy is found outside of the accuracy 
standards of the American National Standards Institute, Incorporated, bill 
adjustments will be made in accordance with the Meter Policy of SWEPCO's 
Manual of Tariffs.


                   V.  Lone Star Generating Equipment and
                       Interconnection with SWEPCO System
                       ----------------------------------

     Lone Star currently has 34.3 MW of generating equipment installed at the 
facility served hereunder.  Lone Star has installed and agrees to maintain in 
good working order necessary interconnection equipment, including protective 
devices and equipment, meeting SWEPCO's standards and specifications to allow 
the operation of such generating equipment in parallel with


<PAGE>

the SWEPCO system in a manner that does not adversely affect either the 
reliability or safety of the SWEPCO system. Should SWEPCO's standards and 
specifications be revised in the future, Lone Star agrees at its expense to 
make any modifications to such interconnection equipment that may be 
reasonably necessary to comply with such revised standards and specifications 
to assure the continued operation of Lone Star's generating equipment in 
parallel with the SWEPCO system without adversely affecting either the safety 
or reliability of the SWEPCO system.

     In the event Lone Star plans to make any change to such generating 
equipment or to the interconnection equipment which could reasonably be 
expected to affect the SWEPCO system or plans any increase in the amount of 
generating capability installed, Lone Star agrees to notify SWEPCO and 
provide SWEPCO with information sufficient for SWEPCO to evaluate the 
potential effects on the SWEPCO system. Lone Star agrees at its expense to 
install such interconnection equipment, including protective devices or 
equipment, as SWEPCO reasonably specifies to ensure that any modifications to 
Lone Star's equipment or increases in the capability of Lone Star's 
generation do not adversely affect either the safety or reliability of the 
SWEPCO system.

     Lone Star's generating equipment may be utilized by Lone Star for 
purposes of supplying part of its total electric capacity and energy needs. 
Because Rate Schedule LSS is a special tariff applicable to Lone Star alone 
and provides for breakdown and standby service, the provisions of Section 7 
of SWEPCO's Standard Terms and Conditions do not affect Lone Star's ability 
to use its installed generation to supply part of its total electric capacity 
and energy needs and the reference in such Section 7 to Rate Schedule (S) 
Standby Service does not apply to service to Lone Star.
<PAGE>
                                       
                           VI.  Motor Installation
                                ------------------

     In accordance with Section 10 of SWEPCO's Standard Terms and Conditions 
as approved by the Commission, SWEPCO recognizes that Lone Star has installed 
some three-phase motors that are rated less than 7.5 HP.
                                       
                   VII.  Term of Contract and Effective Date
                         -----------------------------------

     The Contract will be filed with the Commission. The Contract will be in 
effect for ten years beginning on the later of (i) October 1, 1996, or (ii) 
should the Commission deem approval of the Contract to be necessary, the date 
of the earlier of interim or permanent approval by the Commission. After the 
initial ten year term, the Contract shall continue in effect in automatically 
recurring yearly periods. During its term, the contract can be terminated by 
either party by written notice given to the other not less than twenty-four 
months prior to the termination date designated in such notice.
                                       
                                 VIII.  Notices
                                        -------

     Statements or notices under the Contract shall be mailed to Vice 
President-Engineering and Services, Lone Star Steel Company, Lone Star, Texas 
75668, and to President, Southwestern Electric Power Company, P.O. Box 21106, 
Shreveport, Louisiana 71156.


<PAGE>

SOUTHWESTERN ELECTRIC POWER COMPANY 

SECTION TITLE                    RATES, CHARGES, AND FEES                     
             ---------------------------------------------------------------- 

SECTION NUMBER             4.04                  EFFECTIVE DATE    08/01/85   
               -----------------------------                    ------------- 

APPLICABLE    LONE STAR STEEL COMPANY            ORIGINAL REVISION NUMBER  4  
           ---------------------------------                              --- 


----------------------------------------------------------------------------- 

                  CONTRACT WITH LONE STAR STEEL COMPANY (LSS) 

----------------------------------------------------------------------------- 

                                 AVAILABILITY
                                 ------------

This rate is available to Lone Star Steel Company for service provided under 
a contract specifying the limits and conditions of service as a rate that is 
subject to change by the regulatory authority having jurisdiction during the 
course of any rate proceeding.

I.  BASIC RATES FOR ELECTRIC SERVICE

    A.  Rate Determination
        ------------------

        1. Firm Load:

           Kilowatt Charge:
           ----------------

           $4.62 per Kilowatt for the Firm Load Kilowatts of Billing Demand.

           Kilowatt-hour Charge:
           ---------------------

           0.48c per Kilowatt-hour for all Firm Load Kilowatt-hours with 
           Kilowatt-hours from metered data for usage levels up to the Firm 
           Load Kilowatts of Billing Demand.

        2. Rates for Turbine-Generator Overhaul and Emergency Power are 
           applicable only when this type of power is used with kilowatt-
           hours from metered data for the usage levels specified.  Turbine 
           Generator overhaul kilowatt-hours will be at the firm load rate. 
           Emergency Power kilowatt-hours will be at the Power Emergency rate.

        3. Curtailable Load:

           Kilowatt Charge:
           ----------------

           $3.46 per Kilowatt for the Curtailable Load Kilowatts of Billing 
           Demand.

<PAGE>

           Kilowatt-hour Charge:
           ---------------------

           0.42c per Kilowatt-hour with the kilowatt-hours metered for 
           usage between the Firm Load Kilowatts of Billing Demand and the 
           Curtailable Load Kilowatts of Billing Demand.

        4. Off-Peak Load:

           KILOWATT CHARGE:

           $2.31 per Kilowatt for the Off-Peak Kilowatts of Billing Demand.

           Kilowatt-hour Charge:
           ---------------------

           0.42c per Kilowatt-hour with the kilowatt-hours metered for 
           usage between the Curtailable Load Kilowatts of Billing Demand and 
           the Off-Peak Kilowatts of Billing Demand.

    B.  Determination of Kilowatts of Billing Demand:  The Kilowatts of 
        Billing Demand for each month will be the average kilowatt load used 
        by the Customer during the 30-minute period of maximum use comprised 
        of two consecutive 15-minute periods (with each clock hour being 
        divided into quarter hours) during the on-peak and off-peak hours of 
        the month and will be determined in the following manner and sequence:

        1. Firm Load Kilowatts of Billing Demand:  will be specified from 
           time to time by Customer within the contract constraints.  Any 
           change in Firm Load requires at least 72 hours prior notice to 
           Company with written confirmation being sent within 24 hours of 
           such notice.  An increase will be effective for the entire month 
           in which requested to be effective and a decrease will be 
           effective after the end of such month.

        2. Turbine-Generator Overhaul Kilowatts of Billing Demand:  will be 
           specified in advance by Customer and shall be considered as Firm 
           Load Kilowatts of Billing Demand during the agreed upon period and 
           shall not be used in the Determination of Minimum Kilowatts of 
           Billing Demand.


<PAGE>

     3.   Emergency Power Kilowatts of Billing Demand:  will be specified, at
          the beginning of Emergency Power use by Customer with written 
          confirmation within 24 hours.  Customer will notify Company when the
          emergency has been completed with written confirmation within 24 
          hours.  Emergency Power Kilowatts of Billing Demand as specified 
          will be in addition to the Firm Load Kilowatts of Billing Demand 
          but will be considered as Firm Load Kilowatts of Billing Demand in
          determining Curtailable and off-peak Kilowatts of Billing Demand. 
          Emergency Power Kilowatts of Billing Demand shall not be used in the
          Determination of Minimum Kilowatts of Billing Demand.

     4.   Curtailable Load Kilowatts of Billing Demand:  will be the on-peak 
          hours determination of Kilowatts of Billing Demand less the Firm Load
          Kilowatts of Billing Demand.

     5.   Off-Peak Kilowatts of Billing Demand:  will be the off-peak hours 
          determination of Kilowatts of Billing Demand less the on-peak hours 
          determination of Kilowatts of Billing Demand and shall not be used 
          in the Determination of Minimum Kilowatts of Billing Demand.

C.   Monthly Kilowatt Charge:  The monthly kilowatt charge will be the charge 
     for the Kilowatts of Billing Demand for the current month or the Minimum 
     Kilowatts of Billing Demand, whichever is greater as determined in the 
     following manner and sequence:

     1.   Firm load kilowatts of billing demand at the firm load rate, plus

     2.   Turbine-Generator or Emergency Power Kilowatts of Billing Demand 
          are applicable only when the power is utilized (not to be used in 
          Minimum Kilowatts of Billing Demand), plus

     3.   Curtailable load kilowatts of billing demand at the rate for 
          curtailable load, plus

     4.   Off-Peak Load Kilowatts of Billing Demand at the rate for off-peak 
          load (not to be used in Minimum Kilowatts of Billing Demand).

<PAGE>

D.   Firm Load - Demand and energy used regularly on an as needed basis not 
     subject to normal interruption for load management by Company.

E.   Curtailable Load - Demand and energy used in addition to firm load used 
     regularly on an as needed basis within limits of the contract but subject 
     to interruption for up to 30 times during the curtailable year for a total
     of 150 hours.  Curtailable load will be subject to immediate interruption
     for emergency system conditions in addition to the above.

F.   Curtailable Year - Beginning June 1 and Ending May 31 of the following 
     year.

G.   Interruption Procedure for Curtailable Load:  The interruption procedure 
     will be in the following order:

     1.   Company's system dispatcher will request Customer's designated 
          representative(s) to reduce load to an amount that is not less than
          firm load amount.  Company will attempt to provide at least 30 
          minutes notice but will provide not less than a minimum of 15 minutes
          notice to Customer to reduce its load to the requested load amount.
          Interruptions for emergency system conditions as noted previously 
          shall be subject to immediate interruption.

     2.   If Customer's demand exceeds the predetermined level after actions 
          in step 1 of the interruption procedure, Company shall interrupt 
          total plant service.

H.   Off-Peak Load - Demand and energy used in addition to firm or 
     curtailable load only during the off-peak hours subject to the following 
     limitations.  The average kilowatt load during the off-peak hours will 
     not exceed the on-peak demand by more than 50,000 kilowatts; provided 
     however, the off-peak demand shall not exceed the on-peak demand by more 
     than 30,000 kilowatts during the hours from 6:00 A.M. to 7:30 A.M. in the
     months of October, November, December, January, February, March and April.


<PAGE>

      The Off-Peak Demand limitation of 30,000 kilowatts shall not apply on 
      Saturday or Sunday or the day of a National Holiday. Any Demand in 
      excess of the maximum Off-Peak Demands specified above shall be 
      considered as On-Peak Demands and billed accordingly. Provided further 
      however, Company shall have the right of normal interruption back to the 
      Firm Load during the hours from 3:30 P.M. to 8:00 P.M. in the months of 
      October through April of any calendar year and during the hours from 
      8:00 A.M. to 2:00 P.M. in the months of May through September of any 
      calendar year.

I.    Off-Peak Hours and On-Peak Hours: 
      ---------------------------------
      In the months of May through September of any calendar year, the On-Peak
      Hours are those hours between 2:00 P.M. and 10:00 P.M., Monday through
      Friday; the Off-Peak Hours are those between 10:00 P.M. on one day to 
      2:00 P.M. on the following day, Monday through Thursday and 10:00 P.M.
      on Friday to 2:00 P.M. the following Monday. In the months of October 
      through April of any calendar year, the On-Peak Hours are those hours 
      between 7:30 A.M. and 3:30 P.M., Monday through Friday; the Off-Peak 
      Hours are those between 3:30 P.M. on one day to 7:30 A.M. on the 
      following day, Monday through Thursday and 3:30 P.M. on Friday to 
      7:30 A.M. the following Monday. The On-Peak Hours of the following 
      National Holidays shall be considered Off-Peak Hours in this Agreement: 
      New Year's Day, Independence Day, Labor Day, Thanksgiving Day and 
      Christmas Day. Should any of these days fall on Sunday, the 
      following Monday shall be considered a National Holiday, likewise should
      any of these days fall on Saturday, the preceding Friday shall be 
      considered a National Holiday.

J.    The combined total amount of Curtailable and Off-Peak Load will be 
      limited to the Curtailable Load plus 50,000 KW. Any demand during 
      Off-Peak Hours in excess of Curtailable Load plus 50,000 KW will be 
      considered Firm Load Demand.

II.   Minimum Kilowatts of Billing Demand:
      ------------------------------------
      The Minimum Kilowatts of Billing Demand will be higher of (a) the 
      charge for the On-Peak Demand of the current month, but not less than 
      the charge for 40,000 kilowatts, or (b) any contract provisions.

III.  Determination of Kilovar Charge:
      --------------------------------
      The reactive demand in kilovars will be recorded by SWEPCO. In 
      each month a charge of 35 cents per month shall be made for each kilovar 
      by which Lone Star's maximum 30 minute reactive demand in kilovars is 
      greater than 50 percent of Lone Star's maximum 30 minute kilowatt demand 
      during the same time period in that month.
<PAGE>

IV.   Fuel Cost Component of Base Rates:
      ----------------------------------
      In addition to all other charges, the amount of the bill will be 
      increased by an amount per KWH calculated in accordance with Schedule FC.

V.    Tax Adjustment
      --------------
      Total billing will be decreased or increased by the proportionate 
      part of any new tax or change in rate of tax as provided in the Tax 
      Adjustment Rider.

VI.   Turbine-Generator Overhaul
      --------------------------
      It is recognized that it will be necessary for the integrated 
      operation of the turbine-generators of LONE STAR and power service of 
      SWEPCO, that schedule overhaul periods on the equipment of LONE STAR 
      must be fitted into the similar schedules of SWEPCO as determined by 
      SWEPCO's Chief System Operator. During the agreed upon period of 
      overhaul, the Turbine-Generator Overhaul Kilowatts of Billing Demand 
      shall be determined in accordance with the provisions as stated in the 
      "Determination of Kilowatts of Billing Demand" section, except that the 
      Kilowatts of Billing Demand in excess of the Kilowatts of Billing Demand 
      established under normal operations, shall be prorated on a daily basis 
      during the billing periods when such overhauls are being accomplished. 
      The Turbine-Generator Overhaul Kilowatts of Billing Demand established 
      during the overhaul period shall not be used in the Minimum Kilowatts of 
      Minimum Billing Demand and shall only be applicable during the actual 
      period of overhaul.

VII.  Emergency Power and Energy
      --------------------------
      It is recognized that emergencies may arise in operation of LONE 
      STAR's plant occasioned by a breakdown of the existing generating plant 
      of LONE STAR whereby additional power is required. Therefore, SWEPCO, on 
      request of LONE STAR, agrees to furnish as it has available such 
      emergency power and corresponding energy as may be required by LONE 
      STAR. In addition to normal billing, additional power and energy 
      furnished in an emergency shall be on the following basis:

<PAGE>
                                       
                           EMERGENCY POWER AND ENERGY
                           --------------------------

            0.23c per kilowatt-hour plus the Fuel Cost Component 
            Of Base Rates (Schedule FC) or 110 percent (110%) of 
            SWEPCO's cost of energy whichever is the greater amount 
            for all emergency kilowatt-hours supplied to LONE STAR 
            plus 19.5 CENTS per kilowatt per day for each Kilowatt 
            of Billing Demand established above the Firm Load 
            Kilowatts of Billing Demand.

       The Kilowatts of Billing Demand established during periods of 
       emergency shall not be used in the Determination of Kilowatts of 
       Minimum Billing Demand and shall only be applicable during the 
       month(s) that the emergency power and energy is supplied.

VIII.  Billing and Payments
       --------------------
       Bills for services furnished are rendered monthly and are 
       due and payable within sixteen (16) days of date of bill. A sum 
       equivalent to 1% of the total bill will be added to LONE STAR's 
       total monthly bill, but will be collected only in the event LONE 
       STAR fails to pay in full on or before the due date shown on 
       the bill.
<PAGE>
                                       
                      SOUTHWESTERN ELECTRIC POWER COMPANY
                    GENERAL OFFICES - SHREVEPORT, LOUISIANA
                                     TEXAS

Approved By: Docket No. 14819                                    January 8, 1996
--------------------------------------------------------------------------------
                                       
                               FIXED FUEL FACTOR
                      (FUEL COST COMPONENT OF BASE RATES)
                                 (SCHEDULE FC)


Applicable to all standard rates and all kilowatt-hours sold thereunder. For 
electric service billed under applicable rate schedules for which there is no 
metering, the monthly usage shall be estimated by the Company and the fuel 
factors shall be applied. The following fuel factors adjusted by the 
appropriate loss multiplier will be included in each rate schedule to recover 
fuel costs:

          Applicable Period                     Fixed Fuel Factor
          -----------------                     -----------------
     December, January, February            $ .01800 per kilowatt-hour
     March, April, May                      $ .01893 per kilowatt-hour
     June, July, August                     $ .01907 per kilowatt-hour
     September, October, November           $ .01744 per kilowatt-hour

The cost of fuel included within the Fixed Fuel Factor is comprised of the 
following items:

1.  Cost of fuel consumed in Company's generating plants, plus

2.  Cost of purchased economy energy and power and energy purchased from 
    small power production and cogeneration facilities, plus

3.  Cost of other purchased energy (excluding capacity charges), plus

4.  Cost of small power production and cogeneration, wheeling and other costs 
    associated with generated or purchased power as approved by the Public 
    Utility Commission of Texas, less

5.  Cost of energy (excluding capacity charges) sold outside the retail 
    jurisdictional system.

The cost of fuel consumed in the Company's generating plants shall include 
only these items includible in FERC Accounts 501 and 547 less those costs 
determined in Docket No. 5301 to be nonrecoverable and/or nonreconcilable 
through the Fixed Fuel Factor.



                                     11.01 
<PAGE>
                                       
                      SOUTHWESTERN ELECTRIC POWER COMPANY
                    GENERAL OFFICES - SHREVEPORT, LOUISIANA
                                     TEXAS

Continuation of Schedule
--------------------------------------------------------------------------------
                                       
                               FIXED FUEL FACTOR
                      (FUEL COST COMPONENT OF BASE RATES)
                           (SCHEDULE FC) (Continued)


The Fixed Fuel Factor for the applicable period will be adjusted by the 
appropriate loss multiplier to account for differences in line losses 
corresponding to the voltage level of service. The line loss multipliers are 
as follows:

     Transmission
           138 KV             .95407
            69 KV             .96427
     Substation *             .97075
     Primary                  .98144
     Secondary               1.01638

     * Applicable to Primary Service supplied from the substation bus for 
       customers served on the LLP rate schedule.

The Company will maintain up-to-date monthly and cumulative records of fuel 
costs, fuel revenues and the difference between them. When permitted in 
accordance with Public Utility Commission of Texas Substantive Rule 
23.23(b)(2), Rate Design, the Company will reconcile any cumulative over- or 
under-recovery of fuel cost and will either credit or surcharge, whichever 
is appropriate, the over- or under-recovered fuel costs with interest at the 
rate established by the Commission for overbilling and underbilling.

The Fixed Fuel Factor is subject to change by the Commission in accordance 
with Substantive Rule 23.23 (b)(2), Rate Design.



                                    11.01 A