EXHIBIT
10.61


 


KU Contract #KUF-02849

Amendment #1


 


AMENDMENT
NO. 1 to


COAL
SUPPLY AGREEMENT


 


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


 


In
consideration of the agreements herein contained, the parties hereto agree as
follows:


 


1.0                                                                               MODIFICATIONS
TO AGREEMENT


 


The Agreement
heretofore entered into by the parties, dated effective January 1, 2002 and
identified by the Contract Number set forth above (hereinafter together
referred to as “Agreement”), is hereby amended as follows:


 


1.1                                 Section 3.1 Base
Quantity:


 


The quantity
schedule set forth in Section 3.1 is deleted in its entirety and is replaced
with 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 is
deleted in its entirety and is replaced with the following provision:


 


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


 


1.3                                 Section 4.5. Substitute
Coal:


 


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


 

















 


 


“Notwithstanding
the above representations and warranties, in the event that Seller is unable to
produce or obtain coal from the Coal Property in the quantity and of the
quality required by this Agreement, and such inability is not caused by a force
majeure event as defined in § 10, then Buyer will have the option of requiring
that Seller supply coal from Seller’s other facilities and mines. Seller shall
also have the right to supply substitute coal from sources not owned or
controlled by Seller after having received Buyer’s prior written consent (which
shall not be unreasonably withheld) for up to 20% of the annual volume
commitments. Such substitute coal shall be provided under all the terms and
conditions of this Agreement including, but not limited to, the price
provisions 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 having
received the express written consent of Buyer shall constitute a material
breach of this Agreement.”


 


1.4                                 Section 5.1. Barge
Delivery:


 


The first
literary paragraph of Section 5.1 is deleted in its entirety and is replaced by
the following paragraph. All other portions of Section 5.1 shall remain
unchanged.


 


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


 

















 


1.5                                 Section 6.1. Specifications:


 


Section 6.1 is deleted in
its entirety and is replaced with the following:


 


“6.1         Specifications.


 


(a) The first 1,600,000 tons
of 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

  	
   

  



 












* Individual barge 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

  	
   

  
	
  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

  	
   

  



 












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


 


	
  Note: As
  used herein

  	
   

  	
  >

  	
   

  	
  means
  greater than:

  
	
   

  	
   

  	
  <

  	
   

  	
  means less
  than.

  



 


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


 


	
  Specifications

  	
   

  	
  Guaranteed Monthly

  Weighted Average (1)

  	
   

  	
  Rejection
  Limits

  (per shipment)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BTU/LB.

  	
   

  	
  min. 12,200

  	
   

  	
   

  	
  <

  	
   

  	
  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

  	
   

  



 












* Individual
barge 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

  	
   

  



 

















 


	
  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

  	
   

  



 












(1)
An actual Monthly Weighted Average will be calculated for each specification
for 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 in
its entirety and is replaced with the following provision:


 


“8.1 For the first 1,600,000
tons shipped, the base price (“Base Price”) of the coal to be sold hereunder
will be firm during each time period of this Agreement in accordance with the
following schedule, subject to adjustment only for quality variations pursuant
to §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 the
first 1,600,000 tons, the base price (“Base Price”) of the coal to be sold
hereunder will be firm during each time period of this Agreement in accordance
with the following schedule, subject to adjustment only for quality variations
pursuant 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

  	
   

  



 

















 


1.8.                              Section 8.2.(b). Quality
Price Discounts:


 


The text of
Section 8.2.(b) is deleted in its entirety and is replaced with the following
provision:


 


(b) (i) The
quality price discounts for the first 1,600,000 tons of coal delivered
hereunder shall conform to the following:


 


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


 


	
   

  	
   

  	
  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 the
applicable discount would be (11.00 lb./mmbtu - 10.83 lb./mate) X $.0083
lb./mmbtu = $.001411 /mmBtu.


 


(b)(ii) The
quality price discounts after the first 1,600,000 tons of coal is delivered
hereunder shall conform to the following:


 


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


 

















 


	
   

  	
   

  	
  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 actual
Monthly Weighted Average of ash equals 11.00 lb/MMBTU, then the applicable
discount would be (11.00 lb./mmbtu - 10.00 lb./mmBtu) X $.0083 lb./mmbtu =
$.00830/MMBTU.


 

















 


2.0                                                                                 STATUS OF AGREEMENT


 


The Agreement, as amended by
this Amendment No. 1, is hereby ratified and confirmed and shall continue in
full force and effect. Unless hereby amended, all terms and conditions of the
Agreement shall apply to this Amendment No. 1. This Amendment No. 1 is the
final and complete agreement of the parties hereto respecting the subject
matter hereof and hereby supersedes all prior or contemporaneous oral or
written statements, understandings and promises of the parties relating to the
subject matter hereof.


 


IN WITNESS
WHEREOF, the parties
hereto have executed this Agreement on the dates below written, but effective
as of the day and year first set forth above.


 


 


	
  KENTUCKY
  UTILITIES COMPANY

  	
  ARCH COAL
  SALES COMPANY, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title

  	
   

  	
  Title

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date

  	
   

  	
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