**EXHIBIT10.61**

 

KU Contract #KUF-02849Amendment #1

 

**AMENDMENTNO. 1 to**

**COALSUPPLY AGREEMENT**

 

**THISAMENDMENT NO. 1 to COAL SUPPLY AGREEMENT (“Amendment No. 1”) is**enteredinto effective July 1, 2003, by and between KENTUCKY UTILITIES COMPANY, aKentucky corporation, 220 West Main Street, Louisville, Kentucky 40202 (“KU”),and ARCH COAL SALES COMPANY, INC., a Delaware corporation, agent for theindependent operating subsidiaries of ARCH COAL, INC., a Delaware corporation(collectively “Seller”), whose address is CityPlace One, Suite 300, St. Louis,Missouri 63141.

 

Inconsideration of the agreements herein contained, the parties hereto agree asfollows:

 

**1.0****                                                                               MODIFICATIONSTO AGREEMENT**

 

The Agreementheretofore entered into by the parties, dated effective January 1, 2002 andidentified by the Contract Number set forth above (hereinafter togetherreferred to as “Agreement”), is hereby amended as follows:

 

1.1                                 Section 3.1 BaseQuantity:

 

The quantityschedule set forth in Section 3.1 is deleted in its entirety and is replacedwith the following:

 
| **YEAR** |   | **BASE QUANTITY (TONS)** |
|----------|--------|--------------------------|
| 2002     |   | 600,000                  |
| 2003     |   | 1,100,000                |
| 2004     |   | 800,000                  |
| 2005     |   | 800,000                  |

 

1.2                                 Section 4.1. Source:

 

Section 4.1 isdeleted in its entirety and is replaced with the following provision:

 

“The coal soldhereunder shall be supplied by Seller primarily from the following coal minesowned or controlled by Arch Coal, Inc., its subsidiaries or affiliates:Ruffner, Wylo, Campbell’s Creek, Ragland, Mingo-Logan, Samples and Guyan Mineslocated in Logan, Mingo and Kanawha Counties, West Virginia. Seller shalldetermine, in its discretion, which mine or mines shall produce the coal to besupplied to Buyer for each shipment, provided that Buyer receives a continuoussupply of the quantity and the quality of coal to be provided hereunder. ArchCoal, Inc. benefits from this Agreement as supplier of the coal to be soldhereunder and as the parent corporation of Arch Coal Sales Co., Inc., and ArchCoal, Inc. is therefore the guarantor of Seller’s obligations hereunder pursuantto a Guaranty Agreement of even date herewith.”

 

1.3                                 Section 4.5. SubstituteCoal:

 

Section 4.5 isdeleted in its entirety and is replaced with the following provision:

 

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“Notwithstandingthe above representations and warranties, in the event that Seller is unable toproduce or obtain coal from the Coal Property in the quantity and of thequality required by this Agreement, and such inability is not caused by a forcemajeure event as defined in § 10, then Buyer will have the option of requiringthat Seller supply coal from Seller’s other facilities and mines. Seller shallalso have the right to supply substitute coal from sources not owned orcontrolled by Seller after having received Buyer’s prior written consent (whichshall not be unreasonably withheld) for up to 20% of the annual volumecommitments. Such substitute coal shall be provided under all the terms andconditions of this Agreement including, but not limited to, the priceprovisions of §8, the quality specifications of § 6.1, and the provisions of §5 concerning reimbursement to Buyer for increased transportation costs.Seller’s delivery of coal not produced from the Coal Property without havingreceived the express written consent of Buyer shall constitute a materialbreach of this Agreement.”

 

1.4                                 Section 5.1. BargeDelivery:

 

The firstliterary paragraph of Section 5.1 is deleted in its entirety and is replaced bythe following paragraph. All other portions of Section 5.1 shall remainunchanged.

 

“The coalshall be delivered to Buyer F.O.B. barge at the following points (the “DeliveryPoint”), for coal delivered from the Ruffner Mine, the Wylo Mines, the SamplesMine, the Ragland Mine, the Mingo-Logan Mine and the Guyan Mine: HuntingtonCoal Terminal (HCT), KRT-Ceredo, Ohio River Terminal (ORT) and Arch CoalTerminal (ACT) located at mile points 309.1, 314.5, 306.0 and 318.0respectively on the Ohio River. For coal delivered from the Campbell’s CreekMine: Port Amherst Dock located at mile point 63.9 on the Kanawha River. Sellermay deliver the coal at a location different from the Delivery Points,provided, however, that Seller shall reimburse Buyer for any resultingincreases in the cost of transporting the coal to Buyer’s generating stations.Buyer shall retain any resulting savings in such transportation costs.

 

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1.5                                 Section 6.1. Specifications:

 

Section 6.1 is deleted inits entirety and is replaced with the following:

 

“6.1         Specifications.

 

(a) The first 1,600,000 tonsof coal delivered hereunder shall conform to the following specifications on an“as received” basis:

 
| **Specifications** |   | **Guaranteed Monthly  Weighted Average (1)** |   | **Rejection Limits  (per shipment)** |   |
|--------------------|--------|----------------------------------------------|--------|--------------------------------------|--------|
|               |   |                                         |   |                                 |   |   |   |
| BTU/LB.            |   | min. 12,000                                  |   |                                 | <   |   | 11,800 |   |
|               |   |                                         |   |                                 |   |   |   |   |
| LBS/MMBTU:         |   |                                         |   |                                 |   |   |   |   |
| MOISTURE           |   | max. 6.67                                    |   |                                 | >   |   | 8.33 |   |
| ASH                |   | max. 10.83                                   |   |                                 | >   |   | 11.66 |   |
| SULFUR             |   | max. 0.60 *                                  |   |                                 | >   |   | 0.60 |   |
| SULFUR             |   | min.   NA                               |   |                                 | <   |   | NA |   |
| CHLORINE           |   | max. 0.142                                   |   |                                 | >   |   | 0.21 |   |
| NITROGEN           |   | max. 1.190                                   |   |                                 | >   |   | 1.66 |   |

 

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* Individual barge shipmentlimit of 1.20 lbs. S02/MMBTU

 
| SIZE (2” x 0”):                      |   |          |   |   |   |   |   |   |
|------------------------------------------------|--------|---------------|--------|--------|--------|--------|--------|--------|
| Top size (inches)**                            |   | max. 2x0      |   |   | >   |   | 2x0    |   |
| Fines (% by wgt)                               |   |          |   |   | >   |   |   |   |
| Passing 1/4” screen                       |   | max. 40       |   |   |   |   | 50     |   |
|                                           |   |          |   |   |   |   |   |   |
| BY WEIGHT:                                     |   |          |   |   |   |   |   |   |
| VOLATILE                                       |   | min.  32 |   |   | <   |   | 32     |   |
| FIXED CARBON                                   |   | min.  52 |   |   | <   |   | 50     |   |
| GRINDABILITY (HGI)                             |   | min.  42 |   |   | <   |   | 42     |   |
|                                           |   |          |   |   |   |   |   |   |
| ASH  FUSION TEMPERATURE (°F) (ASTM D1857) |   |          |   |   |   |   |   |   |
|                                           |   |          |   |   |   |   |   |   |
| REDUCING ATMOSPHERE                            |   |          |   |   |   |   |   |   |
| Initial Deformation                            |   | min. +2700    |   |   | min.   |   | +2700  |   |
| Softening (H=W)                                |   | min. +2700    |   |   | min.   |   | +2700  |   |
| Softening (H=1/2W)                             |   | min. +2700    |   |   | min.   |   | +2700  |   |
| Fluid                                          |   | min. +2700    |   |   | min.   |   | +2700  |   |
|                                           |   |          |   |   |   |   |   |   |
| OXIDIZING ATMOSPHERE                           |   |          |   |   |   |   |   |   |
| Initial Deformation                            |   | min. +2700    |   |   | min.   |   | +2700  |   |

 

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| Softening (H=W)    |   | min. +2700 |   |   | min. |   | +2700 |   |
|--------------------|--------|------------|--------|--------|------|--------|-------|--------|
| Softening (H=1/2W) |   | min. +2700 |   |   | min. |   | +2700 |   |
| Fluid              |   | min. +2700 |   |   | min. |   | +2700 |   |

 

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(1) An actualMonthly Weighted Average will be calculated for each specification for coaldelivered to the Kentucky Utilities Ghent generating station.

 
| Note: As  used herein |   | > |   | means  greater than: |
|-----------------------|--------|------|--------|----------------------|
|                  |   | < |   | means less  than.    |

 

(b) After thefirst 1,600,000 tons of coal is delivered hereunder, the coal shall conform tothe following specifications on an “as received” basis:

 
| **Specifications** |   | **Guaranteed Monthly  Weighted Average (1)** |   | **Rejection  Limits  (per shipment)** |   |
|--------------------|--------|----------------------------------------------|--------|---------------------------------------|--------|
|               |   |                                         |   |                                  |   |   |   |
| BTU/LB.            |   | min. 12,200                                  |   |                                  | <   |   | 11 |   |
| LBS/MMBTU:         |   |                                         |   |                                  |   |   |   |   |
| MOISTURE           |   | max. 6.67                                    |   |                                  | >   |   | 8.33 |   |
| ASH                |   | max. 10.00                                   |   |                                  | >   |   | 11.00 |   |
| SULFUR             |   | max. 0.60  *                                 |   |                                  | >   |   | 0.60 |   |
| SULFUR             |   | min. NA                                      |   |                                  | <   |   | NA |   |
| CHLORINE           |   | max. 0.142                                   |   |                                  | >   |   | 0.21 |   |
| NITROGEN           |   | max. 1.190                                   |   |                                  | >   |   | 1.66 |   |

 

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* Individualbarge shipment limit of 1.20 lbs. S02/MMBTU

 
| SIZE (2” x 0”):                     |   |           |   |   |   |   |   |   |
|-----------------------------------------------|--------|----------------|--------|--------|--------|--------|--------|--------|
| Top size  (inches)**                          |   | max. 2x0       |   |   | >   |   | 2x0    |   |
| Fines (% by  wgt)                             |   |           |   |   | >   |   |   |   |
|  Passing 1/4” screen                |   | max. 40        |   |   |   |   | 50     |   |
|                                          |   |           |   |   |   |   |   |   |
| BY WEIGHT:                                    |   |           |   |   |   |   |   |   |
| VOLATILE                                      |   | min.   32 |   |   | <   |   | 32     |   |
| FIXED CARBON                                  |   | min.   52 |   |   | <   |   | 50     |   |
| GRINDABILITY (HGI)                            |   | min.   42 |   |   | <   |   | 42     |   |
|                                          |   |           |   |   |   |   |   |   |
| ASH FUSION TEMPERATURE (°F) (ASTM D1857) |   |           |   |   |   |   |   |   |
|                                          |   |           |   |   |   |   |   |   |
| REDUCING  ATMOSPHERE                          |   |           |   |   |   |   |   |   |
| Initial  Deformation                          |   | min. +2700     |   |   | min.   |   | +2700  |   |

 

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| Softening (H=W)      |   | min. +2700 |   |   | min.   |   | +2700  |   |
|----------------------|--------|------------|--------|--------|--------|--------|--------|--------|
| Softening (H=1/2W)   |   | min. +2700 |   |   | min.   |   | +2700  |   |
| Fluid                |   | min. +2700 |   |   | min.   |   | +2700  |   |
|                 |   |       |   |   |   |   |   |   |
| OXIDIZING ATMOSPHERE |   |       |   |   |   |   |   |   |
| Initial Deformation  |   | min. +2700 |   |   | min.   |   | +2700  |   |
| Softening (H=W)      |   | min. +2700 |   |   | min.   |   | +2700  |   |
| Softening (H=1/2W)   |   | min. +2700 |   |   | min.   |   | +2700  |   |
| Fluid                |   | min. +2700 |   |   | min.   |   | +2700  |   |

 

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(1)An actual Monthly Weighted Average will be calculated for each specificationfor coal delivered to the Kentucky Utilities Ghent generating station.

 
| Note: As  used herein |   | > |   | means  greater than: |
|-----------------------|--------|------|--------|----------------------|
|                  |   | < |   | means less  than.    |

 

1.6                                 Section 8.1. Base Price:

 

Section 8.1 is deleted inits entirety and is replaced with the following provision:

 

“8.1 For the first 1,600,000tons shipped, the base price (“Base Price”) of the coal to be sold hereunderwill be firm during each time period of this Agreement in accordance with thefollowing schedule, subject to adjustment only for quality variations pursuantto §8.2 and New Costs pursuant to §8.4:

 
|              |   |                  |   | **BASE PRICE**       |   |
|-------------------|--------|-----------------------|--------|----------------------|--------|
| **PERIOD**        |   | **LOADING  POINT**    |   | **($ PER  MMBTU)**   |   | **($ PER  TON)** |   |
|              |   |                  |   |                 |   |   |   |
| 1/1/02 - 12/31/03 |   | Huntington,  WV Docks |   | 1.8333  F.O.B. barge |   | $ | 44.00 |   |
|                   |        |                       |        |                      |        |  |  |  |

 

For tons shipped after thefirst 1,600,000 tons, the base price (“Base Price”) of the coal to be soldhereunder will be firm during each time period of this Agreement in accordancewith the following schedule, subject to adjustment only for quality variationspursuant to §8.2 and New Costs pursuant to §8.4:

 
|       |   |               |   | **BASE PRICE**        |   |
|------------|--------|--------------------|--------|-----------------------|--------|
| **PERIOD** |   | **LOADING  POINT** |   | **($ PER  MMBTU)**    |   | **($ PER  TON)** |   |
|       |   |               |   |                  |   |   |   |
| 10/1/03    | -      | 12/31/03           |   | Huntington,  WV Docks |   | 1.4344  F.O.B. barge |   | $ | 35.00 |   |
| 1/1/04     | -      | 12/31/04           |   | Huntington,  WV Docks |   | 1.5164 F.O.  B. barge |   | $ | 37.00 |   |
| 1/1/05     | -      | 12/31/05           |   | Huntington  WV Docks  |   | 1.5471 F.O.  B. barge |   | $ | 37.75 |   |

 

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1.8.                              Section 8.2.(b). QualityPrice Discounts:

 

The text ofSection 8.2.(b) is deleted in its entirety and is replaced with the followingprovision:

 

(b) (i) Thequality price discounts for the first 1,600,000 tons of coal deliveredhereunder shall conform to the following:

 

Notwithstanding theforegoing, for each specification, there shall be no discount if the actualMonthly Weighted Average meets the applicable Discount Point set forth below. However,if the actual Monthly Weighted Average for the Kentucky Utilities Ghentgenerating station fails to meet such applicable Discount Point, then thediscount shall apply to and shall be calculated on the basis of the differencebetween the actual Monthly Weighted Average and the Guaranteed Monthly WeightedAverage pursuant to the methodology shown in Exhibit A attached hereto.

 
|      |   | **Guaranteed Monthly  Weighted Average** |   | **Discount Point** |   |
|-----------|--------|------------------------------------------|--------|--------------------|--------|
|      |   |                                     |   |               |   |
| BTU/LB    |   | Min. 12,000                              |   | 11,800             |   |
|      |   |                                     |   |               |   |
| LB/MMBTU: |   |                                     |   |               |   |
| ASH       |   | Max. 10.83                               |   | 10.83              |   |
|      |   |                                     |   |               |   |
| MOISTURE  |   | Max. 6.67                                |   | 8.33               |   |
|      |   |                                     |   |               |   |
|      |   | **Guaranteed Barge  LbsSO2/Mmbtu**       |   | **Discount Point** |   |
| LB/MMBTU: |   |                                     |   |               |   |
| SO2       |   | Max. 1.20                                |   | 1.20               |   |

 

For example,if the actual Monthly Weighted Average of ash equals 11.00 lb/MMBTU, then theapplicable discount would be (11.00 lb./mmbtu - 10.83 lb./mate) X $.0083lb./mmbtu = $.001411 /mmBtu.

 

(b)(ii) Thequality price discounts after the first 1,600,000 tons of coal is deliveredhereunder shall conform to the following:

 

Notwithstanding theforegoing, for each specification, there shall be no discount if the actualMonthly Weighted Average meets the applicable Discount Point set forth below.However, if the actual Monthly Weighted Average for the Kentucky UtilitiesGhent generating station fails to meet such applicable Discount Point, then thediscount shall apply to and shall be calculated on the basis of the differencebetween the actual Monthly Weighted Average and the Guaranteed Monthly WeightedAverage pursuant to the methodology shown in Exhibit A attached hereto.

 

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|      |   | **Guaranteed  Monthly  Weighted Average** |   | **Discount  Point** |   |
|-----------|--------|-------------------------------------------|--------|---------------------|--------|
|      |   |                                      |   |                |   |
| BTU/LB    |   | Min. 12,200                               |   | 12,000              |   |
|      |   |                                      |   |                |   |
| LB/MMBTU: |   |                                      |   |                |   |
| ASH       |   | Max. 10.00                                |   | 10.60               |   |
|      |   |                                      |   |                |   |
| MOISTURE  |   | Max. 6.67                                 |   | 8.33                |   |
|      |   |                                      |   |                |   |
|      |   | **Guaranteed  Barge  LbsSO2/Mmbtu**       |   | **Discount  Point** |   |
| LB/MMBTU: |   |                                      |   |                |   |
| SO2       |   | Max. 1.20                                 |   | 1.20                |   |

 

For example, if the actualMonthly Weighted Average of ash equals 11.00 lb/MMBTU, then the applicablediscount would be (11.00 lb./mmbtu - 10.00 lb./mmBtu) X $.0083 lb./mmbtu =$.00830/MMBTU.

 

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2.0                                                                                 **STATUS OF AGREEMENT**

 

The Agreement, as amended bythis Amendment No. 1, is hereby ratified and confirmed and shall continue infull force and effect. Unless hereby amended, all terms and conditions of theAgreement shall apply to this Amendment No. 1. This Amendment No. 1 is thefinal and complete agreement of the parties hereto respecting the subjectmatter hereof and hereby supersedes all prior or contemporaneous oral orwritten statements, understandings and promises of the parties relating to thesubject matter hereof.

 

**IN WITNESSWHEREOF,**the partieshereto have executed this Agreement on the dates below written, but effectiveas of the day and year first set forth above.

 

 
| **KENTUCKY  UTILITIES COMPANY** | **ARCH COAL  SALES COMPANY, INC.** |
|---------------------------------|------------------------------------|
|                            |                               |
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| By                              |                               | By |   |   |
|                            |                               |   |   |   |
| Title                           |                               | Title |   |   |
|                            |                               |   |   |   |
| Date                            |                               | Date |   |   |

 

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