**EXHIBIT10.60**

 

**BLACK BEAUTY COAL COMPANY**

**LGE Contract # LGE02012**

**KU Contract # KUF02857**

**Amendment No. 1**

 

**AMENDMENT NO. 1 TO COAL SUPPLY AGREEMENT**

 

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

 

**1.0 AMENDMENTS**

 

The Agreement heretoforeentered into by the parties, dated effective January 1, 2002 and identified bythe Contract Numbers set forth above, is hereby amended as follows. The January1, 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 onJanuary 1, 2002 and shall continue through December 31, 2007, subject to theprice review set forth in § 8.1.

 

**3.0QUANTITY**

 

3.1                                 Section 3.1 **Base Quantity,**is deleted and replaced with the followingprovision:

 

3.1           **BaseQuantity.**Seller shall sell and deliver and Buyer shall purchaseand 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 willspecify at Buyer’s sole option, a minimum of 500,000 tons of Quality 1 up to amaximum of 700,000 tons of Quality 1. The remainder of the Base Quantity shallbe Quality 2.

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

 

The BaseQuantity will be delivered in approximately equal monthly quantities and inaccordance with a mutually agreed upon schedule.

 

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** **

**4.0          SOURCE**

 

4.1                                 Section 4.1 **Source**is deleted and replaced with thefollowing provision:

 

Section 4.1 **Source.**The coal sold hereunder shallbe supplied primarily from geological seam Indiana #6 and #5, from Seller’sSomerville Mine Complex located in Gibson County, Indiana (the “CoalProperty”).

** **

**5.0          QUALITY**

 

5.1                                 Section 6.1 **Specifications**is deleted and replacedwith the following provision:

 

Section 6.1 **Specifications.**

 

(a) The coaldelivered hereunder shall conform to the following specifications on an “asreceived” 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 eachspecification for coal delivered to the Louisville Gas and Electric generatingstations and a separate actual Monthly Weighted Average will be calculated foreach specification for coal delivered to the Kentucky Utility generatingstations.

 

**  All the coal will be of such size that it will pass through ascreen having circular perforations three (3) inches in diameter, but shall notcontain more than fifty per cent (50%) by weight of coal that will pass througha 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 AcidRatio (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 additionto the specifications set forth in § 6.1(a), the coal delivered hereunderdesignated as Quality 1 shall conform on an “as received” basis to thefollowing specifications:

 

**QUALITY1 (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 willspecify on a monthly basis, the qualities (Quality 1 and/or Quality 2) that areto be delivered during a calendar month, no later than twenty (20) days priorto the start of that month. During any calendar year during the term of thisAgreement, Buyer shall specify on an annual basis, an annual total of at least500,000 tons and a maximum of 700,000 tons of the base quantity tons for thatcalendar year as Quality 1. The remainder of the base quantity tons shall beQuality 2.

 

(2) An actualMonthly Weighted Average will be calculated for each specification for coaldelivered to the Louisville Gas and Electric generating stations and a separateactual Monthly Weighted Average will be calculated for each specification forcoal delivered to the Kentucky Utility generating stations.

 

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

** **

**QUALITY2****(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 willspecify on a monthly basis, the qualities (Quality 1 and/or Quality 2) that areto be delivered during a calendar month, no later than twenty (20) days priorto the start of that month. During any calendar year during the term of thisAgreement, Buyer shall specify on an annual basis, an annual total of at least500,000 tons and a maximum of 700,000 tons of the base quantity tons for thatcalendar year as Quality 1. The remainder of the base quantity tons shall beQuality 2.

 

(2) An actualMonthly Weighted Average will be calculated for each specification for coaldelivered to the Louisville Gas and Electric generating stations and a separateactual Monthly Weighted Average will be calculated for each specification forcoal delivered to the Kentucky Utility generating stations.

 

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

 

If the coalsold hereunder fails to meet one (1) or more of the Guaranteed Monthly WeightedAverages set forth in § 6.1 (as to either or both of LG&E or KU) for anytwo (2) consecutive months or a total of three (3) months in a six (6) monthperiod, or if six (6) barge shipments in a thirty (30) day period arerejectable by Buyer, or if Buyer receives at generating station(s) two (2) railshipments which are rejectable in any thirty (30) day period, then Buyer mayupon notice confirmed in writing and sent to Seller by certified mail, suspendfuture shipments except shipments already loaded into barges and/or railcars.Seller shall, within ten (10) days, provide Buyer with reasonable assurancesthat subsequent monthly deliveries of coal shall meet or exceed the Guaranteed Monthly WeightedAverages set forth in § 6.1. If Seller fails to provide such assurances withinsaid ten (10) day period, Buyer may terminate this Agreement by giving writtennotice of such termination at the end of the ten (10) day period. A waiver ofthis right for any one (1) period by Buyer shall not constitute a waiver forsubsequent periods. If Seller provides such assurances to Buyer’s reasonablesatisfaction, shipments hereunder shall resume and any tonnage deficienciesresulting from suspension may be made up at Buyer’s sole option. Buyer shallnot unreasonably withhold its acceptance of Seller’s assurances, or delay theresumption of shipment. If Seller, after providing such assurances, fails tomeet any of the Guaranteed Monthly Weighted Averages (as to either LG&E orKU) for any one (1) month within the next six (6) months or if three (3) bargeshipments or one (1) rail shipment are rejectable within any one (1) monthduring such six (6) month period, then Buyer may terminate this Agreement andexercise all its other rights and remedies under applicable law and in equityfor Seller’s breach.

 

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**6.0****                               PRICE**

 

6.1                                 Section8.1 **Base Price**is deletedand replaced with the following provision:

 

8.1 **Base Price.**The base price (“BasePrice”) 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 asdefined in § 5 in accordance with the following schedule:

 

**BASEPRICE—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 andSeller will begin negotiations on price, quantity and other terms andconditions on or before June 1, 2005 for prices and quantities to be effectiveduring the years 2006 and 2007. The parties then shall attempt to negotiate onnew prices, quantities and/other terms and conditions between June 1, 2005 andAugust 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 dueto such termination for either party. Notwithstanding anything herein to thecontrary, the Base Price and Base Quantity set forth herein for the years 2006and 2007 are for use as reference points for the negotiations described in thisparagraph and the parties do not intend to be bound by any terms and conditionsrelating 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 exclusivesupply agreement.

 

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6.2                                 Section8.2(b) is deleted and replaced with the following provision:

 

8.2 (b)               Notwithstanding the foregoing, for eachspecification, there shall be no discount if the actual Monthly WeightedAverage meets the applicable Discount Point set forth below. Actual MonthlyWeighted Averages will be separately calculated for the Louisville Gas andElectric generating stations and for the Kentucky Utility generating stations.However, if the actual Monthly Weighted Average for the Louisville Gas andElectric generating stations and/or the Kentucky Utility generating stationsfail to meet such applicable Discount Point, then the discount shall apply toand shall be calculated on the basis of the difference between the actualMonthly Weighted Average and the Guaranteed Monthly Weighted Average pursuantto the methodology shown in Exhibit A attached hereto. The discount will beapplied only to the particular company whose actual Monthly Weighted Averagefailed to meet the Discount Points.

 

**QUALITY1**

 
| **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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**QUALITY2**

 
| **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 11.20lb/MMBTU, then the applicable discount would be (I 1.201b. - 10.501b.) X..0083/lb/MMBTU = $.00581/MMBTU.

 

**7.0CREDIT RATING**

 

7.1                                 Section 21.0 **CREDIT RATING**is added as follows.

 

**SECTION 21.0     CREDITRATING**

 

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

 

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

 

“InvestmentGrade 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 shallmean Moody’s Investor Services, Inc. or its successors. S&P shall mean theStandard & Poor’s Rating Group (a division of McGraw-Hill Inc.) or itssuccessors.

 

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**IN WITNESSWHEREOF,**the partieshereto 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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