**EXECUTION VERSION**

**EXHIBIT 10.5 **

**PURCHASEAND SALE AGREEMENT**

**byand between**

**DUKE ENERGY NORTH AMERICA, LLC,**

**asSeller,**

**and**

**PNMRESOURCES, INC.,**

**PHELPSDODGE ENERGY SERVICES, LLC**

**and**

**TUCSONELECTRIC POWER COMPANY,**

**asPurchasers**

** **

**datedas of November 12, 2004**

**DEMINGENERGY FACILITY**

**Luna County, New Mexico**

** **

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**TABLE OF CONTENTS**

ARTICLE IDEFINITIONS
| 1.1 | Definitions  | 1 |
|-----|--------------|---|
| 1.2 | Construction | 7 |

ARTICLE IIPURCHASE AND SALE AND CLOSING
| 2.1 | Purchase and Sale                 | 7 |
|-----|-----------------------------------|---|
| 2.2 | Purchase Price                    | 7 |
| 2.3 | Closing                           | 8 |
| 2.4 | Closing Deliveries  by Seller     | 8 |
| 2.5 | Closing Deliveries  by Purchasers | 8 |
| 2.6 | Allocation of  Purchase Price     | 9 |

ARTICLE IIIREPRESENTATIONS ANDWARRANTIES REGARDING SELLER
| 3.1 | Organization,  Standing and Power | 9  |
|-----|-----------------------------------|----|
| 3.2 | Authority                         | 9  |
| 3.3 | No Conflicts                      | 10 |
| 3.4 | Capitalization                    | 10 |
| 3.5 | Legal Proceedings                 | 10 |
| 3.6 | Compliance with Laws  and Orders  | 10 |
| 3.7 | Brokers                           | 10 |
| 3.8 | Bankruptcy                        | 10 |

ARTICLE IVREPRESENTATIONS ANDWARRANTIES REGARDING THE COMPANY
| 4.1  | Organization,  Standing and Power | 11 |
|------|-----------------------------------|----|
| 4.2  | No Conflicts                      | 11 |
| 4.3  | Capitalization                    | 11 |
| 4.4  | Business                          | 12 |
| 4.5  | Subsidiaries                      | 12 |
| 4.6  | Legal Proceedings                 | 12 |
| 4.7  | Compliance with Laws  and Orders  | 12 |
| 4.8  | No Undisclosed  Liabilities       | 12 |
| 4.9  | Taxes                             | 12 |
| 4.10 | Investment Company  Act           | 13 |
| 4.11 | Contracts                         | 13 |
| 4.12 | Real Property                     | 13 |
| 4.13 | Personal Property                 | 13 |
| 4.14 | Permits                           | 13 |
| 4.15 | Environmental  Matters            | 13 |
| 4.16 | Employees                         | 14 |
| 4.17 | Brokers                           | 14 |
| 4.18 | Bankruptcy                        | 14 |

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**TABLE OF CONTENTS**(continued)

ARTICLE VREPRESENTATIONS ANDWARRANTIES OF PURCHASERS
| 5.1 | Organization,  Standing and Power | 15 |
|-----|-----------------------------------|----|
| 5.2 | Authority                         | 15 |
| 5.3 | No Conflicts                      | 15 |
| 5.4 | Legal Proceedings                 | 16 |
| 5.5 | Compliance with Laws  and Orders  | 16 |
| 5.6 | Brokers                           | 16 |
| 5.7 | Acquisition as  Investment        | 16 |
| 5.8 | Bankruptcy                        | 16 |
| 5.9 | No Knowledge of  Seller's Breach  | 16 |

ARTICLE VICOVENANTS
| 6.1 | Construction  Documents | 17 |
|-----|-------------------------|----|
| 6.2 | Use of Certain Names    | 17 |
| 6.3 | Excluded Items          | 17 |
| 6.4 | Further Assurances      | 17 |
| 6.5 | Accounting  Settlement  | 18 |

ARTICLE VIITAX MATTERS
| 7.1 | Preparation and  Filing of Tax Returns | 18 |
|-----|----------------------------------------|----|
| 7.2 | Access to  Information                 | 20 |
| 7.3 | Indemnification by  Seller             | 20 |
| 7.4 | Purchaser Tax  Indemnification         | 21 |
| 7.5 | Tax Indemnification  Procedures        | 21 |
| 7.6 | Conflict                               | 22 |
| 7.7 | Transfer Taxes                         | 22 |
| 7.8 | Termination of  Project Bonds          | 22 |

ARTICLE VIIIINDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS AND DISPUTERESOLUTION
| 8.1 | Indemnification                                     | 22 |
|-----|-----------------------------------------------------|----|
| 8.2 | Limitations of  Liability                           | 23 |
| 8.3 | Limited Claim Period                                | 24 |
| 8.4 | Waiver of Other Representations                     | 24 |
| 8.5 | Waiver of Remedies                                  | 24 |
| 8.6 | Dispute Resolution                                  | 25 |
| 8.7 | Procedure for  Indemnification - Third-Party Claims | 25 |

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**TABLE OF CONTENTS**(continued)

 

ARTICLE IXMISCELLANEOUS
| 9.1  | Notices                                 | 26 |
|------|-----------------------------------------|----|
| 9.2  | Entire Agreement                        | 28 |
| 9.3  | Expenses                                | 28 |
| 9.4  | Public Announcements                    | 28 |
| 9.5  | Confidential  Information               | 28 |
| 9.6  | Disclosure                              | 29 |
| 9.7  | Waiver                                  | 29 |
| 9.8  | Amendment                               | 29 |
| 9.9  | No Third Party  Beneficiary             | 29 |
| 9.10 | Assignment; Binding  Effect             | 30 |
| 9.11 | Headings                                | 30 |
| 9.12 | Invalid Provisions                      | 30 |
| 9.13 | Counterparts;  Facsimile                | 30 |
| 9.14 | Governing Law;  Venue; and Jurisdiction | 30 |
| 9.15 | Attorneys' Fees                         | 31 |

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**TABLE OF CONTENTS**(continued)

SCHEDULES

Part 1.1(a)        -          Personswith KnowledgePart 1.1(b)       -           Easements,Licenses and Rights-of-WayPart 1.1(c)        -          Descriptionof Permitted LiensPart 1.1(d)       -           Descriptionof Purchased AssetsPart 1.1(e)        -          Descriptionof Power Plant SitePart 1.1(f)        -           Descriptionof Wellfield SitesPart 2.6            -           PurchasePrice Allocation SchedulePart 4.9            -           TaxesPart 4.11          -           MaterialContractsPart 4.5            -           SubsidiariesPart 4.14(a)      -           PermitsPart 6.3            -           ExcludedItems

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**PURCHASEAND SALE AGREEMENT**

Deming Energy Facility

**THIS PURCHASE AND SALE AGREEMENT** datedas of November 12, 2004 is made and entered into by and between **DUKE ENERGY****NORTH AMERICA, LLC**, a limited liability company formed under the Laws ofthe State of Delaware (**"*Seller*"**), and **PNM RESOURCES,INC.,**a****New Mexico corporation (**"*PNMR*"**),**PHELPS DODGE ENERGY SERVICES, LLC**, a Delaware limited liability company (**"*PDES*"**),and **TUCSON ELECTRIC POWER COMPANY,** an Arizona corporation (**"*TEP*"**;each of PNMR, PDES and TEP individually a **"*Purchaser,*"**andcollectively the***"Purchasers"*).**

**RECITALS**

A.        Seller is the sole member of, andowns 100% of the membership interests (the **"*Company Interests*"**)of, Duke Energy Luna, LLC, a limited liability company formed under the Laws ofthe State of Delaware (the **"*Company*"**).

B.         The Company owns a partiallyconstructed approximately 570 MW (nominal) combined cycle natural gas-firedmerchant power plant located in Luna County, New Mexico sometimes referred toas the Deming Energy Facility.

C.        Seller desires to sell to eachPurchaser, and each Purchaser desires to purchase from Seller, 33-1/3% of theCompany Interests on the terms and subject to the conditions set forth herein.

**STATEMENT OF AGREEMENT**

Now, therefore, in consideration of thepremises and the mutual representations, warranties, covenants and agreementsset forth in this Agreement, and for other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged, the Parties agree asfollows:

**ARTICLE IDEFINITIONS**

***1.1             ******Definitions***.  Capitalized terms used in thisAgreement have the meanings given to them in this Section 1.1.

**"*1933 Act*"** has themeaning given to it in Section 5.7.

**"*Affiliate*"** means anyPerson that directly, or indirectly through one or more intermediaries,controls, is controlled by or is under common control with the Personspecified. For purposes of this definition, control of a Person means thepower, direct or indirect, to direct or cause the direction of the managementand policies of such Person whether through ownership of voting securities orownership interests, by contract or otherwise, and specifically with respect toa corporation, partnership or limited liability company, means direct orindirect ownership of more than 50% of the voting securities in suchcorporation or of the voting interest in a partnership or limited liabilitycompany.

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**"*Agreement*"** means thisPurchase and Sale Agreement, as it may hereafter be amended in accordance withits terms.

**"*Assets*"** of any Personmeans all assets and properties of every kind, nature, character anddescription (whether real, personal or mixed, whether tangible or intangibleand wherever situated), including the goodwill related thereto, owned or leasedby such Person.

**"*Business*"** means thedevelopment, construction, ownership, repair and maintenance of the Project ascurrently conducted by the Company.

**"*Business Day*"** means aday other than Saturday, Sunday or any day on which banks located in the Stateof New York, the State of Arizona and the State of New Mexico are authorized orobligated to close.

**"*Charter Documents*"**means with respect to any Person, the articles of incorporation or organizationand the by-laws, the limited partnership agreement, the partnership agreementor the limited liability company agreement, or such other organizationaldocuments of  such Person, including those that are required to be registeredor kept in the place of incorporation, organization or formation of such Personand which establish the legal personality of such Person.

**"*Claim*"** means anydemand, claim, action, investigation, legal proceeding (whether at law or inequity) or arbitration, whether or not ultimately determined to be valid.

**"*Closing*"** means theclosing of the transactions contemplated by this Agreement, as provided for in Section2.3.

**"*Closing Date*"** meansthe date on which Closing occurs.

**"*Code*"** means theInternal Revenue Code of 1986, as amended.

**"*Company*"** has themeaning given to it in the recitals.

**"*Company Interests*"** hasthe meaning given to it in the recitals.

**"*Contract*"** means anywritten or oral contract, lease, license, evidence of indebtedness, mortgage,indenture, purchase order, binding bid, letter of credit, security agreement orother written or oral and legally binding arrangement.

**"*DECT*"**means DukeEnergy Capital of Texas, Inc., a Delaware corporation.

**"*Easements"***means theeasements, licenses and rights-of-way granted to the Company that areappurtenant to the Power Plant Site, as further described in Part 1.1(b)of the Schedules.

**"*Environmental Claim*"**means any claim, loss, cost, expense, liability, penalty or damage arising outof or related to any violation of Environmental Law.

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**"*Environmental Law*"**means the Comprehensive Environmental Response, Compensation and Liability Act,42 U.S.C. § 9601 et seq.; the Resource Conservation and Recovery Act, 42U.S.C. § 6901 et seq.; the Federal Water Pollution Control Act, 33 U.S.C.§ 1251 et seq.; the Clean Air Act, 42 U.S.C. § 7401 et seq.; theHazardous Materials Transportation Act, 49 U.S.C. § 1471 et seq.; the ToxicSubstances Control Act, 15 U.S.C. §§ 2601 through 2629; the Oil PollutionAct, 33 U.S.C. § 2701 et seq.; the Emergency Planning and CommunityRight-to-Know Act, 42 U.S.C. § 11001 et seq.; the Safe Drinking Water Act,42 U.S.C. §§ 300f through 300j; and all similar Laws (including Laws ofthe State of New Mexico) of any Governmental Authority having jurisdiction overthe assets in question addressing pollution (including Hazardous Materials andReleases) or protection of the environment and cultural and historic resources,and all amendments to such Laws and all regulations implementing any of theforegoing.  The term "Environmental Law" does not include any changesin Laws occurring after the Closing Date.

**"*Excluded Items*"** hasthe meaning given to it in Section 6.3.

**"*GAAP*"** means generallyaccepted accounting principles in the United States of America applied on aconsistent basis.

**"*Governmental Authority*"**means any court, tribunal, arbitrator, authority, agency, commission, officialor other instrumentality of the United States or any state, county, city,tribal authority or other political subdivision or similar governing entity,and including any governmental, quasi-governmental or non-governmental body.

**"*Hazardous Material*"**means and includes each substance designated as a hazardous waste, hazardoussubstance, hazardous material, pollutant, contaminant or toxic substance underany Environmental Law and any petroleum or petroleum products that have beenReleased into the environment.

**"*Indemnified Party*"** hasthe meaning given to it in Section 8.7(a).

**"*Indemnifying Party*"**has the meaning given to it in Section 8.7(a).

**"*Indenture*"** means thatcertain Indenture among City of Deming, New Mexico, DECT, and Wachovia Bank,National Association (f/k/a First Union National Bank) dated as of July 1, 2001.

**"*Knowledge*"**means the actual knowledge (as opposed to any constructive or imputedknowledge), (i) with respect to Seller, of the individuals listed on SectionA of Part 1.1(a) of the Schedules, and (ii) with respect toPurchasers, of the individuals listed in Section B of Part 1.1(a)of the Schedules.

**"*Laws*"** means all laws,statutes, rules, regulations, opinions, orders, ordinances and otherpronouncements or promulgations of any Governmental Authority having the effectof law or otherwise binding on a Person.

**"*Lien*"** means anymortgage, pledge, assessment, security interest, lien or other encumbrance ofany kind.

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**"*LLC Agreement*"** meansthe Limited Liability Company Agreement of the Company dated May 9, 2000, as the same may be amended from time to time.

**"*Loss*"** means any andall judgments, losses, liabilities, amounts paid in settlement, damages, fines,penalties, deficiencies, losses and expenses (including interest, court costs,reasonable fees of attorneys, accountants and other experts or other reasonableexpenses of litigation or other proceedings or of any claim, default orassessment), but only to the extent such losses are not compensated by receiptof payment from some third party or by the proceeds of insurance or otherwiserecovered from third parties and are net of any associated benefits arising inconnection with such loss, including any associated Tax benefits.

**"*Material Contract*"** or **"*MaterialContracts*"** has the meaning given to it in Section 4.11.

**"*Non-Company Affiliate*"**means any Affiliate of Seller, except for the Company.

**"*Parties*"** means eachPurchaser and Seller.

**"*Permits*"** means alllicenses, permits, certificates of authority, authorizations, approvals,acceptances for filing, registrations, franchises and similar consents grantedby a Governmental Authority.

**"*Permitted Lien*"** means(a) any Lien for Taxes not yet due or delinquent or being contested in goodfaith by appropriate proceedings; (b) any Lien arising in the ordinary courseof business by operation of Law with respect to a liability that is not yet dueor delinquent or which is being contested in good faith by Seller or theCompany; (c) all matters that are disclosed in the title policies insuring thePower Plant Site or the Wellfield Sites or that would be revealed by a currentsurvey; (d) imperfections or irregularities of title and other Liens thatwould not, individually or in the aggregate, reasonably be expected to resultin a cost to remedy that exceeds the amount of $500,000; (e) zoning, planning,and other similar limitations and restrictions, all rights of any GovernmentalAuthority to regulate the Real Property, and all matters of record; and  (f)the matters identified in Part 1.1(c) of the Schedules.

**"*Person*"** means anynatural person, corporation, general partnership, limited partnership, limitedliability company, proprietorship, other business organization, trust, union,association or Governmental Authority.

**"*Post-Closing Tax Period*"**means any taxable period beginning after the Closing or with respect to anytaxable period that begins on or before the Closing and ends after the Closing,the portion of such taxable period after the Closing.

**"*Power Plant Site*"**meansthe real property located in Luna County, New Mexico, approximately two milesnorthwest of Deming, New Mexico, as further described in Part 1.1(e) ofthe Schedules.

***"Pre-Closing Tax Period*"**means any taxable period ending on or before the Closing or with respect to anytaxable period that begins on or before the Closing and ends after the Closing,the portion of such taxable period ending on the Closing.

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**"*Project*"** means anominally rated approximately 570 megawatt natural gas-fired combined cycleelectric generating plant located on the Real Property, as conceived, designed,engineered and partially constructed by the Company as of the Closing Date andgenerally described in Part 1.1(d)  of the Schedules, and moreparticularly described in the specifications set forth as Part A of Exhibit Bto the terminated construction contract between the Company and Duke/FluorDaniel, entitled "Scope of Work," true and complete copies of whichspecifications have been delivered to Purchasers.

**"*Project Bonds*"**meansthose certain City of Deming, New Mexico Taxable Industrial Revenue Bonds (DukeEnergy Luna, LLC Project) Series 2001, issued by the City of Deming pursuant toa Bond Purchase Agreement, dated as of July 1, 2001, among the City of Deming,the Company, and DECT and related documents, including the Indenture.

**"*Purchase Price*"** hasthe meaning given to it in Section 2.2.

**"*Purchase Price Allocation Schedule*"**has the meaning given to it in Section 2.6.

**"*Purchased Assets*"**means the Assets of the Company generally described in Part 1.1(d) ofthe Schedules.

**"*Purchaser*" or *"Purchasers"***has the meaning given to it in the introduction to this Agreement.

**"*Purchaser Deductible Amount*"**has the meaning given to it in Section 8.2(c).

**"*Purchaser Related Persons*"**has the meaning given to it in Section 8.1(a).

**"*Real Property*"** meansthe Power Plant Site, the Wellfield Sites and the Easements.

**"*Release*"** means anyrelease, spill, emission, migration, leaking, pumping, injection, deposit,disposal or discharge of any Hazardous Materials into the environment, to theextent prohibited, or otherwise requiring removal or remediation, underapplicable Environmental Laws.

**"*Representatives*"**means, as to any Person, its officers, directors, employees, agents, counsel,accountants, financial advisers or consultants.

**"*Schedules*"** means thedisclosure schedules prepared by Seller or Purchasers, as applicable, andattached to this Agreement.

**"*Seller*"** has themeaning given to it in the introduction to this Agreement.

**"*Seller Deductible Amount*"**has the meaning given to it in Section 8.2(b).

**"*Seller Group*"** meansthe affiliated group of corporations of which Seller is the common parent,which join in the filing of a consolidated federal income tax return (and anysimilar group under state law).

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**"*Seller Marks*"** has themeaning given to it in Section 6.2.

**"*Seller Related Persons*"**hasthe meaning given to it in Section 8.1(b).

**"*Solvent"*** means, withrespect to any Person on a particular date, that on such date (a) the fairvalue of the property of such Person is greater than the total amount ofliabilities, including contingent liabilities, of such Person, (b) suchPerson is able to meet its obligations as those obligations mature, and(c) such Person is not engaged in business or a transaction for which suchPerson's property would constitute an unreasonably small capital.  The amountof contingent liabilities at any time shall be computed as the amount that, inthe light of all the facts and circumstances existing at such time, representsthe amount that can reasonably be expected to become an actual or maturedliability.

**"*Tax*"** or **"*Taxes*"**means any federal, state, local or foreign income, gross receipts andcompensating, ad valorem, sales and use, employment, social security,disability, occupation, property, severance, value added, transfer, capitalstock, excise or other taxes imposed by or on behalf of any Taxing Authority orpayment made in lieu thereof, including any interest, penalty or additionthereto.

**"*Tax Indemnified Claim*"**has the meaning given to it in Section 7.5.

**"*Tax Indemnified Party*"**has the meaning given to it in Section 7.5.

**"*Tax Indemnifying Party*"**has the meaning given to it in Section 7.5.

**"*Tax Items*"** has themeaning given to it in Section 7.1(a).

**"*Tax Return*"** means anyreturn, declaration, report, exhibits, schedules, information return orstatement and other documentation (including any additional or supportingmaterial, attachment, amendment or supplement thereto) filed or maintained, orrequired to be filed or maintained, in connection with the calculation,determination, assessment or collection of any Tax and shall include any amendedreturn or claim for refund.  

**"*Taxing Authority*"**means, with respect to any Tax, the governmental entity or politicalsubdivision thereof that imposes such Tax, and the agency (if any) charged withthe collection of such Tax for such entity or subdivision.

**"*Transfer Taxes*"** meansall transfer, sales, use, goods and services, value added, documentary, stampduty, gross receipts, excise, transfer and conveyance Taxes and other similarTaxes, duties, fees or charges, including any interest, penalty or additionthereto, and excluding ad valorem or property Taxes or Taxes in lieu of thesame.

**"*Wellfield Sites*"**meansthe real property described on Part 1.1(f) of the Schedules.

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***1.2             ******Construction***.

(a)               All article, section, subsection, schedule and exhibit references used inthis Agreement are to articles, sections, subsections, schedules and exhibitsto this Agreement unless otherwise specified.  The exhibits and schedulesattached to this Agreement constitute a part of this Agreement and areincorporated herein for all purposes.  Any inconsistencies between the body ofthis Agreement and the schedules and exhibits attached hereto shall be resolvedin favor of the body of this Agreement.

(b)              If a term is defined as one part of speech (such as a noun), it shallhave a corresponding meaning when used as another part of speech (such as averb).  Unless the context of this Agreement clearly requires otherwise thesingular shall include the plural and the plural shall include the singularwherever and as often as may be appropriate, words importing the masculinegender shall include the feminine and neutral genders and vice versa. The words"includes" or "including" shall mean "includingwithout limitation," the words "hereof," "hereby,""herein," "hereunder" and similar terms in this Agreementshall refer to this Agreement as a whole and not any particular section orarticle in which such words appear and any reference to a statute, regulationor law shall include any amendment thereof or any successor thereto and anyrules and regulations promulgated thereunder.  Currency amounts referencedherein, unless otherwise specified, are in U.S. Dollars.

(c)               Time is of the essence in this Agreement.  Whenever this Agreementrefers to a number of days, such number shall refer to calendar days unlessBusiness Days are specified. Whenever any action must be taken hereunder on orby a day that is not a Business Day, then such action may be validly taken onor by the next day that is a Business Day.

(d)              All accounting terms used herein and not expressly defined herein shallhave the meanings given to them under GAAP.

(e)               Each Party acknowledges that it and its attorneys have been given anequal opportunity to negotiate the terms and conditions of this Agreement andthat any rule of construction to the effect that ambiguities are to be resolvedagainst the drafting Party or any similar rule operating against the drafter ofan agreement shall not be applicable to the construction or interpretation ofthis Agreement.

**ARTICLE IIPURCHASE AND SALE AND CLOSING**

***2.1             ******Purchase and******Sale***.  On the terms and subject to the conditions set forth inthis Agreement, and by execution and delivery of the Assignments of LimitedLiability Company Membership Interests simultaneously herewith, each Purchaserhereby purchases from Seller, and Seller hereby sells to each Purchaser, thirtythree and one-third percent (33-1/3%) of the Company Interests, free and clearof all Liens.  

***2.2             ******Purchase Price***.  Each Purchaser hereby pays,or causes to be paid, to Seller, in cash, the sum of $13,333,333.33 in considerationof its respective 33-1/3% Company Interest being purchased, for an aggregatepurchase price of $40,000,000.00 (the **"*Purchase Price*"**)for all of the Company Interests. 

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***2.3             ******Closing***.  The Closing is occurring at theoffices of Keleher & McLeod, P.A., Albuquerque, New Mexico at 10:00 A.M. local time on November 12, 2004. The Closing shall be effective as of 12:01 a.m. on the Closing Date, and all actions scheduled in this Agreement for theClosing Date shall be deemed to occur simultaneously at such time.  

***2.4             ******Closing Deliveries by Seller***.  Seller isdelivering, or is causing to be delivered, to Purchasers the following:

(a)               one or more Assignments of Limited Liability Company MembershipInterests evidencing the assignment and transfer of 33-1/3% of the Company Interestsand all rights of Seller under the LLC Agreement to each Purchaser;

(b)              ** **copies of release and cancellationinstruments, evidencing the cancellation of the Project Bonds and the releaseof the Company from the Indenture and any liabilities associated therewith;

(c)               copies of termination documentation evidencing the termination of theLease Agreement, dated as of July 1, 2001, between the City of Deming and theCompany, together with appropriate reconveyance instruments evidencing thereconveyance of title to the Project from the City of Deming to the Company,and any other related documents; 

(d)              a Transition Consulting Services Agreement;

(e)               a certificate of an officer of Seller, dated as of the Closing Date,setting forth and attesting to (i) the resolutions of the board of managers ofSeller authorizing the execution, delivery and performance of this Agreementand the consummation of the transactions contemplated hereby; and (ii) theincumbency and signature of the officer of Seller executing this Agreement;

(f)                a complete copy of the Company's articles of organization and allamendments thereto, certified by the Secretary of State of Delaware as of adate no earlier than 10 Business Days prior to the Closing Date and a completecopy of the LLC Agreement and all amendments thereto, certified by an officerof Seller;

(g)               certificates from appropriate authorities, dated no earlier than 10Business Days prior to the Closing Date, as to the good standing and legalexistence of the Company in the State of Delaware and as to the good standingand qualification to do business by the Company in the State of New Mexico;

(h)               the resignations of the managers and officers of the Company; and

(i)                 one or more opinions of legal counsel to Seller as to certain customarymatters, collectively in form and substance reasonably satisfactory toPurchasers.

***2.5             ******Closing Deliveries by Purchasers***. Each Purchaser is delivering, or is causing to be delivered, to Seller thefollowing:

(a)               One or more wire transfers of immediately available funds (to suchaccount as Seller shall have specified to Purchasers prior to the Closing Date)in an aggregate amount equal to such Purchaser's 33-1/3% share of the PurchasePrice;

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(b)              a Transition Consulting Services Agreement;

(c)               copies of alldocuments or instruments effecting the full and unconditional release of DukeCapital LLC under that certain Guaranty to the Benefit of General ElectricInternational, Inc. dated December 9, 2002;

(d)               the certificate of an officer of such Purchaser,dated as of the Closing Date, in form and substance reasonably satisfactory toSeller, setting forth and attesting to (i) the resolutions of the board ofdirectors or other requisite authority of such Purchaser authorizing theexecution, delivery and performance of this Agreement and the consummation ofthe transactions contemplated hereby, and (ii) the incumbency and signature ofeach officer of such Purchaser executing this Agreement; and

(e)               one or more opinionsof legal counsel to each Purchaser as to certain customary matters,collectively in form and substance reasonably satisfactory to Seller.

***2.6             ******Allocation of Purchase Price***.  Seller andPurchasers agree that the Purchase Price shall be allocated among the PurchasedAssets in accordance with the allocation schedule (the **"*PurchasePrice Allocation Schedule*"**) set forth on Part 2.6 of theSchedules.  Seller and Purchasers shall prepare mutually acceptable andsubstantially identical IRS Form 8594 "Asset Acquisition Statements UnderSection 1060" consistent with the Purchase Price Allocation Schedule whichthe Parties shall use to report the transactions contemplated by this Agreementto the applicable Taxing Authorities. Seller and each Purchaser agree toprovide the other promptly with any other information required to complete Form8594.

**ARTICLE IIIREPRESENTATIONS AND WARRANTIES REGARDING SELLER**

Seller hereby represents and warrants toPurchasers that, except as disclosed in the Schedules:

***3.1             ******Organization, Standing and Power***.  Seller is alimited liability company, duly organized, validly existing and in goodstanding under the Laws of the State of Delaware.

***3.2             ******Authority***.  Seller has all requisite power andauthority to execute and deliver this Agreement, to perform its obligationshereunder and to consummate the transactions contemplated hereby.  Theexecution and delivery by Seller of this Agreement, and the performance bySeller of its obligations hereunder, have been duly and validly authorized byall necessary company action.  This Agreement has been duly and validlyexecuted and delivered by Seller and constitutes the legal, valid and bindingobligation of Seller enforceable against Seller in accordance with its terms,except as enforceability may be limited by bankruptcy, insolvency,reorganization, arrangement, moratorium or other similar Laws relating to oraffecting the rights of creditors generally, or by general equitableprinciples.

***3.3             ******No Conflicts***.  The execution and delivery bySeller of this Agreement do not, and the performance by Seller of itsobligations under this Agreement will not:

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(a)               conflict with or result in a violation or breach of any of the terms,conditions or provisions of its Charter Documents;

(b)              violate or result in a default (or give rise to any right oftermination, cancellation or acceleration) under any material contract to whichSeller is a party, except for any such violations or defaults (or rights oftermination, cancellation or acceleration) which are not, individually, or inthe aggregate, reasonably expected to have a material adverse effect onSeller's ability to consummate the transactions contemplated hereby; and

(c)               (i) conflict with, violate or breach any material term or provision ofany Law or writ, judgment, order or decree applicable to Seller or any of itsmaterial Assets or (ii) require the consent, approval or authorization of,or notice to or filing with, any Governmental Authority under any applicableLaw.

***3.4             Capitalization***

(a)               Seller owns 100% of the Company Interests.

(b)              Seller is not a party to any written or oral agreement, and has notgranted to any Person any option or any right or privilege capable of becomingan agreement or option, for the purchase or acquisition from Seller of any ofthe Company Interests.

(c)               Seller owns and holds of record and is the beneficial owner of theCompany Interests free and clear of all Liens and, without limiting thegenerality of the foregoing, none of the Company Interests are subject to anyvoting trust, shareholder agreement or voting agreement.

***3.5             ******Legal Proceedings***.  There are no actions orproceedings (including orders, judgments and writs) outstanding or pending inany court, regulatory body, Governmental Authority or, to the Seller'sKnowledge, threatened by or against Seller which would be reasonably expectedto result in the issuance of an order restraining, enjoining or otherwiseprohibiting or making illegal the consummation of the transactions contemplatedby this Agreement.

***3.6             ******Compliance with Laws and Orders***.  Seller is not inviolation of or in default under any Law or order applicable to Seller or itsAssets the effect of which, individually or in the aggregate, could reasonablybe expected to materially impair Seller's ability to perform its obligationshereunder.

***3.7             ******Brokers***.  Seller has no liability orobligation to pay fees or commissions to any broker, finder or agent withrespect to the transactions contemplated by this Agreement for which anyPurchaser could become liable or obligated.

***3.8             ******Bankruptcy***.  There are no bankruptcy,reorganization, or arrangement proceedings pending against, being contemplatedby, or, to the Knowledge of Seller, threatened against, Seller.  After givingeffect to the obligations (including contingent obligations) hereunder andassuming the accuracy of the Purchasers' representations, warranties, covenantsand agreements herein, the Seller is Solvent.

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**ARTICLE IVREPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY**

Seller hereby represents and warrants toPurchasers that, except as disclosed in the Schedules:

***4.1             ******Organization, Standing and Power***.  The Companyis a limited liability company duly organized, validly existing and in goodstanding under the laws of the State of Delaware and has all requisite powerand authority to conduct the Business.  The Company is duly qualified orlicensed to do business in the State of New Mexico and in each jurisdiction inwhich the Business makes such qualification or licensing necessary, except inthose jurisdictions where the failure to be so duly qualified or licensed wouldnot reasonably be expected to result in a material adverse effect on thePurchased Assets, the Business or the Company.  Seller has made available toPurchaser true, correct and complete copies of the Charter Documents of theCompany.

***4.2             ******No Conflicts***.  The execution and delivery bySeller of this Agreement do not, and the performance by Seller of itsobligations under this Agreement and the consummation of the transactionscontemplated hereby will not:

(a)               conflict with or result in a violation or breach of any of the terms,conditions or provisions of the Charter Documents of the Company;

(b)              (i) conflict with or result in a violation or breach, in anymaterial respect, of any term or provision of any Law or writ, judgment, orderor decree applicable to the Company or any of its Assets or (ii) requirethe consent, approval or authorization of, or notice to or filing with, anyGovernmental Authority under any applicable Law; and

(c)               be in violation of or result in a default (or give rise to any right oftermination, cancellation or acceleration) under any Material Contract, or inthe creation of a Lien or other encumbrance whatsoever on the Company Interestsor the Purchased Assets, except for any such violations and defaults (or rightsof termination, cancellation or acceleration) and Liens which would not,individually or in the aggregate, reasonably be expected to result in a cost toremedy that exceeds the amount of $100,000.

***4.3             ******Capitalization***.

(a)               The Company Interests represent all of the membership interests in theCompany.

(b)              All of the Company Interests have been duly authorized and validlyissued and are fully paid and non-assessable, to the extent such terms areapplicable.

(c)               The Company is not a party to any written or oral agreement, and has notgranted any option or any right or privilege capable of becoming an agreementor option for the purchase, subscription, allotment or issue of any unissuedinterests, units or other securities (including convertible securities,warrants or convertible obligations of any nature) of the Company.

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***4.4             ******Business***.  The Business is the only businessoperation that has been and is carried on by the Company.

***4.5             ******Subsidiaries***.  Except as described in Part4.5 of the Schedules, the Company has not had any subsidiaries or otherwiseowned equity interests in any Person. The Company does not now have anysubsidiaries or otherwise own equity interests in any Person.

***4.6             ******Legal Proceedings***.  There are no actions orproceedings (including orders, judgments and writs) outstanding or pending inany court, regulatory body, Governmental Authority or, to the Seller'sKnowledge, threatened by or against the Company. 

***4.7             ******Compliance with Laws and Orders***.  To theSeller's Knowledge, the Company is, and has been at all times since the date ofits formation, in compliance in all material respects with all Laws and ordersapplicable to it; provided that this Section 4.7 provides norepresentation or warranty regarding Environmental Laws, which are exclusivelyaddressed by Sections 4.14 and 4.15.

***4.8             ******No Undisclosed Liabilities***.  Except as will berepaid or extinguished on or prior to Closing pursuant to Sections 2.4(b) and(c), there are no liabilities individually or in the aggregate thatwould be reasonably expected to result in the Company incurring a paymentobligation or other liability in excess of $100,000, but excluding (i)liabilities under the Contracts disclosed to Purchaser, (ii) liabilities underthis Agreement, and (iii) liabilities under the Company's unexpired Permitslisted on Part 4.14 of the Schedules.

***4.9             ******Taxes***.  Except as set forth on Part 4.9of the Schedules:

(a)        All material TaxReturns that are required to be filed on or before the Closing Date by the Companyhave been duly and timely filed, and all Taxes that are owed on or before theClosing Date by the Company have been timely paid in full;

(b)        All withholding Taxrequirements imposed on the Company have been satisfied in full in all materialrespects, except for amounts that are being contested in good faith;

(c)        The Company does nothave in force any waiver of any statute of limitations in respect of Taxes orany extension of time with respect to any material Tax assessment ordeficiency;

(d)        There are no pendingor active material audits or, to the Seller's Knowledge, threatened materialaudits or proposed deficiencies or other claims for unpaid Taxes of theCompany; and

(e)        The Company has notelected under Treasury Regulation Section 301.7701-3 to be classified as acorporation for federal income tax purposes and is instead classified as adisregarded entity for such purposes; and

                                (f)         The Company is not aparty to or otherwise liable under any Tax sharing agreement or similararrangement (including any indemnity arrangement).

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***4.10         ******Investment Company Act***.  The Company is not an"investment company," a company "controlled" by an"investment company" or an "investment advisor" within themeaning of the Investment Company Act of 1940.

***4.11         ******Contracts***.

(a)               Excluding any agreements entered into in the ordinary course of businessand as would not reasonably be expected to result in a payment or a series ofpayments by the Company exceeding $50,000 in the aggregate in any 12-monthperiod, Part 4.11 of the Schedules sets forth a list of all Contracts towhich the Company is a party or by which its Assets may be bound (collectively,**"*Material Contracts*"** and individually a **"*MaterialContract*"**).

(b)              Seller has provided Purchaser with, or access to, true and completecopies of all Material Contracts.

(c)               Each of the Material Contracts is in full force and effect andconstitutes a valid and binding obligation of the Company and, to the Seller'sKnowledge, the other parties thereto.

(d)              The Company is not in breach or default in any material respect underany Material Contract, the Company has not received notice by any party of itsintent to breach or default under any Material Contract and, to the Seller'sKnowledge, no other party to any of the Material Contracts is in breach ordefault in any material respect thereunder.

***4.12         ******Real Property***.  The Company has good and validfee title to the Power Plant Site and the Wellfield Sites, in each case freeand clear of all Liens other than Permitted Liens.  The Company holds good andvalid title to the Easements, free and clear of all Liens other than PermittedLiens.

***4.13         ******Personal Property***.  The Company owns and hasgood title to all of the tangible and intangible personal property constitutingpart of the Purchased Assets, free and clear of all Liens, except for PermittedLiens.   

***4.14         ******Permits***.

(a)               Part 4.14(a) of the Schedules sets forth all material, expiredand unexpired Permits acquired or held by or in the name of the Company inconnection with the ownership, construction, operation, maintenance or use ofthe Project, true and complete copies of which have been delivered toPurchasers.

(b)              Seller is in substantial compliance with each unexpired Permit, eachunexpired Permit is valid and in full force and effect, and the Company has notreceived any written notification from any Governmental Authority alleging thatit is in material violation of any unexpired Permits.

***4.15         ******Environmental Matters***.

(a)               Seller has made available to Purchasers, on a confidential basis, trueand complete copies of all material environmental site assessment reports,studies and related documents in the possession of Seller or the Company thatrelate to environmental matters in connection with the Project or the RealProperty.

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(b)              To Seller's Knowledge and except as disclosed in the reports referred toin Section 4.15(a) above:

(i)                 the Company has not been served with notice of any Environmental Claims,actions, proceedings or investigations and no Environmental Claims arethreatened against the Company before any Governmental Authority under anyEnvironmental Laws;

(ii)               from the time that the Company acquired or otherwise took control of theReal Property, there has been no event or occurrence at the Project or withrespect to the Real Property that has resulted in a material violation of anyEnvironmental Law;

(iii)              the Company has been in compliance in all material respects withEnvironmental Laws; and

(iv)             from the time the Company acquired or otherwise took control of the RealProperty, there has been no Release of any Hazardous Material on, at or underthe Real Property or at or from the Project that would result in a materialEnvironmental Claim.

(c)               Seller makes no representation or warranty regarding any environmentalmatters except as expressly set forth in Sections 4.14 and 4.15.

***4.16         ******Employees***.  The Company does not have and never has had anyemployees, and no individuals are or ever have been employed by any Affiliateof the Company solely to work on matters relating to the Project (other thanwith regard to supervision of Project construction, preparation for operationand subsequent maintenance of laid-up equipment).  No claim is pending, or toSeller's Knowledge threatened, in which any individual or GovernmentalAuthority asserts, or in the case of any threatened claim, may assert, that anyindividual is or was an employee of the Company or employed by any Affiliate ofthe Company in respect of the Project (other than with regard to supervision ofProject construction preparation for operation and subsequent maintenance oflaid-up equipment).  Neither Company, any Purchaser nor any of their respectiveAffiliates have incurred or will incur any liability under or otherwise inrespect of any employee compensation or benefit plan, program, agreement orarrangement (including any employee benefit plan (within the meaning of Section3(3) of the Employee Retirement Income Security Act of 1974, as amended))established or maintained by Seller or any other entity that together withSeller is or ever was deemed a single employer in accordance with Section 414of the Code.

***4.17         ******Brokers***.  The Company has no liability orobligation to pay fees or commissions to any broker, finder or agent withrespect to the transactions contemplated by this Agreement.

***4.18         ******Bankruptcy***.  There are no bankruptcy,reorganization, or arrangement proceedings pending against, being contemplatedby, or, to the Knowledge of Seller, threatened against the Company.

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**ARTICLE VREPRESENTATIONS AND WARRANTIES OF PURCHASERS**

Each Purchaser, for itself but not for theother Purchasers, hereby represents and warrants to Seller as follows:

***5.1             ******Organization, Standing and Power***.  TEP representsand warrants that it is a corporation duly organized, validly existing and ingood standing under the laws of the State of Arizona and has all requisitecorporate power and authority to enter into this Agreement, to perform itsobligations hereunder and to consummate the transactions contemplated hereby. PDES represents and warrants that it is a limited liability company dulyorganized, validly existing and in good standing under the laws of the State ofDelaware and has all requisite company power and authority to enter into thisAgreement, to perform its obligations hereunder and to consummate thetransactions contemplated hereby.  PNMR represents and warrants that it is acorporation duly organized, validly existing and in good standing under thelaws of the State of New Mexico and has all requisite corporate power andauthority to enter into this Agreement, to perform its obligations hereunderand to consummate the transactions contemplated hereby.  Each Purchaserrepresents and warrants that it is duly qualified or licensed to do business ineach other jurisdiction where the actions required to be performed by ithereunder make such qualification or licensing necessary, except in thosejurisdictions where the failure to be so qualified or licensed would notreasonably be expected to result in a material adverse effect on suchPurchaser's ability to perform its obligations hereunder.

***5.2             ******Authority***.  The execution and delivery by suchPurchaser of this Agreement and the performance by such Purchaser of itsobligations hereunder have been duly and validly authorized by all requisitecorporate or company action on behalf of such Purchaser.  This Agreement hasbeen duly and validly executed and delivered by such Purchaser and constitutesthe legal, valid and binding obligation of such Purchaser enforceable againstsuch Purchaser in accordance with its terms except as enforceability may belimited by bankruptcy, insolvency, reorganization, arrangement, moratorium orother similar Laws relating to or affecting the rights of creditors generally,or by general equitable principles.

***5.3             ******No Conflicts***.  The execution and delivery bysuch Purchaser of this Agreement, the performance by such Purchaser of itsobligations hereunder and the consummation of the transactions contemplatedhereby will not:

(a)               conflict with or result in a violation or breach of any of the terms,conditions or provisions of its Charter Documents;

(b)              be in violation of or result in a default (or give rise to any right oftermination, cancellation or acceleration) under any material contract to whichsuch Purchaser is a party or by which any of its Assets may be bound except forany such violations or defaults (or rights of termination, cancellation oracceleration) which would not, individually or in the aggregate, reasonably beexpected to result in a material adverse effect on such Purchaser's ability toconsummate the transactions contemplated hereby; or

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(c)               (i) conflict with or result in a violation or breach, in any materialrespect, of any term or provision of any Law or writ, judgment, order or decreeapplicable to such Purchaser or any of its Assets or (ii) require theconsent, approval or authorization of, or notice to or filing with, anyGovernmental Authority under any applicable Law.

***5.4             ******Legal Proceedings***.  Such Purchaser has notbeen served with notice of any Claim, and to such Purchaser's knowledge, noneis threatened, against such Purchaser which seeks a writ, judgment, order ordecree restraining, enjoining or otherwise prohibiting or making illegal any ofthe transactions contemplated by this Agreement.

***5.5             ******Compliance with Laws and Orders***.  SuchPurchaser is not in violation of or in default under any Law or orderapplicable to such Purchaser or its Assets the effect of which, individually orin the aggregate, could reasonably be expected to materially impair suchPurchaser's ability to perform its obligations hereunder.

***5.6             ******Brokers***.  Such Purchaser does not have anyliability or obligation to pay fees or commissions to any broker, finder oragent with respect to the transactions contemplated by this Agreement for whichSeller could become liable or obligated.

***5.7             ******Acquisition as Investment***.  Such Purchaser isacquiring its share of the Company Interests for its own account as aninvestment without the present intent to sell, transfer or otherwise distributesuch Company Interests to any other Person.  Such Purchaser has made,independently and without reliance on Seller (except for such Purchaser'sreliance on the representations and warranties of Seller expressly set forth inthis Agreement) its own analysis of the Company Interests, the Company and thePurchased Assets for the purpose of acquiring the Company Interests and suchPurchaser has had reasonable and sufficient access to documents, otherinformation and materials as it considers appropriate to make its evaluations. Such Purchaser acknowledges that the Company Interests are not registeredpursuant to the Securities Act of 1933 as amended, (the **"*1933 Act*"**)and that none of the Company Interests may be transferred, except pursuant toan applicable exception under the 1933 Act.  Such Purchaser is an "accreditedinvestor" as defined under Rule 501 promulgated under the 1933 Act.

***5.8             ******Bankruptcy******.***  There are nobankruptcy, reorganization, or arrangement proceedings pending against, beingcontemplated by, or, to the Knowledge of such Purchaser, threatened against,such Purchaser.  After giving effect to the obligations (including contingentobligations) hereunder and assuming the accuracy of the Seller'srepresentations, warranties, covenants and agreements herein, such Purchaser isSolvent.

***5.9             ******No Knowledge of Seller's Breach******.*** Such Purchaser does not have Knowledge of any breach by Seller of any of therepresentations and warranties of Seller or the Company contained herein.

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**ARTICLE VICOVENANTS**

The Parties hereby covenant and agree as follows:

***6.1             ******Construction Documents. ***Within 30 days followingClosing, Seller shall deliver, or shall cause to be delivered, to Purchasers,to the extent not already provided to Purchasers, all construction drawings andconstruction documents (including studies) in the possession or control, on theClosing Date, of Seller or Company that were prepared for the construction,operation and maintenance of the Project (other than those documents withheldby Duke/Fluor Daniel or Fluor Daniel falling within the category of tradesecrets as described in Part 6.3 of the Schedules). Notwithstanding the foregoing, the Purchasers agree that the applicabledrawings and documents located at Fluor Daniel's offices shall be deemed tohave been delivered to Purchasers *in situ*.

***6.2             ******Use of Certain Names***.  Within 30 daysfollowing Closing or, if later, within 30 days following the date that Sellersdeliver the materials referred to in Section 6.1 to Purchasers, eachPurchaser shall cause the Company to cease using the words "DENA,""Duke" and "Duke Energy"****or any word or expressionsimilar thereto or constituting an abbreviation or extension thereof (the **"*SellerMarks*"**), including eliminating such words from the Real Propertyand disposing of any unused stationery and literature of the Company bearingsuch words, and thereafter, no Purchaser, the Company, nor their respectiveAffiliates shall use any logos, trademarks, trade names, patents or otherintellectual property rights belonging to Seller or any Affiliate thereof, andeach Purchaser acknowledges that it has no rights whatsoever to use suchintellectual property.  Notwithstanding the foregoing: 

(a)               Purchasers are deemed to have "removed" Seller Marks onconstruction, training and operational material and manuals if they place aconspicuous, permanent notice on, at a minimum, the front cover and title pageof the material or manuals, clearly indicating that the Company is no longer anAffiliate of Seller or any of its Affiliates; and

(b)              Within 10 Business Days after the Closing Date, Purchasers shall causethe Company to change its name to a name that does not contain "DukeEnergy" or any of the other Seller Marks; provided, however, that ifPurchasers have, within such 10-day period, undertaken to dissolve the Companyand are in the process of winding up the affairs of the Company consistent withapplicable Laws, Purchasers shall not be required to change the name of theCompany.

***6.3             ******Excluded Items***.  Notwithstanding anything inthis Agreement to the contrary, each Purchaser acknowledges and agrees that theCompany does not have title to (or, in the case of the property identified initem (z) of Part 6.3 of the Schedules, may not have title to) those Assetsdescribed on Part 6.3 of the Schedules (the **"*Excluded Items*"**).

***6.4             ******Further Assurances***.  Subject to the terms andconditions of this Agreement, at any time, or from time to time, after theClosing, at a Party's request and without further consideration, the otherParty or Parties, as the case may be, shall execute and deliver to such Partysuch other instruments of sale, transfer, conveyance, assignment andconfirmation, provide such materials and information and take such otheractions as such Party may reasonably request in order to consummate thetransactions contemplated by this Agreement.

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***6.5             ******Accounting Settlement***.  Prior to the Closing, Sellershall have caused all accounts receivable and all accounts payable, tradepayables and other indebtedness of the Company to be transferred to Seller or aNon-Company Affiliate.  After the Closing, invoices for goods purchased, orservices performed, prior to the Closing Date will be for the account of Sellerand invoices for goods purchased, or services performed, on and after theClosing Date shall be for the account of Purchasers.  Purchasers shall have allresponsibility and liability for Company's performance of its obligations andcommitments arising after Closing.  After the Closing, Purchasers shallpromptly remit to Seller any invoices for which Seller is responsible pursuantto this Section 6.5, and Seller shall promptly pay them.  After theClosing, Seller shall promptly remit to Purchasers any invoices for whichPurchasers are responsible pursuant to this Section 6.5, and Purchasersshall promptly pay their pro rata share of them.

**ARTICLE VIITAX MATTERS**

***7.1             Preparation and Filing of Tax Returns.***

(a)               Seller shall cause to be included in the consolidated federal income TaxReturns (and the state income Tax Returns of any state that permitsconsolidated, combined or unitary income Tax Returns, if any) of the SellerGroup for all periods ending on or before the Closing Date, all items ofincome, gain, loss, deduction or credit (**"*Tax Items*"**)of the Company that are required to be included therein, shall cause such TaxReturns to be timely filed with the appropriate Taxing Authorities, and shallbe responsible for the timely payment (and entitled to any refund) of all Taxesdue with respect to the periods covered by such Tax Returns.  The income of theCompany will be apportioned to the period up to and including the Closing Dateand the period after the Closing Date by closing the books of the Company as ofthe end of the Closing Date.

(b)              Seller shall prepare or cause to be prepared all Tax Returns of theCompany for all periods ending on or prior to the Closing Date that are filedafter the Closing Date and are not described in paragraph (a) above.  Sellershall deliver a copy of each such Tax Return to Purchasers at least 15 daysprior to the due date (including extensions) for filing such Tax Return. Seller shall permit Purchasers to review and comment on such Tax Return andshall make such revisions to such Tax Return as reasonably requested byPurchasers.  Purchasers and Seller shall work in good faith to agree upon themanner in which such Tax Return is prepared (including the treatment of any TaxItems on such Tax Return) and, failing such agreement, shall resolve the matterin a manner consistent with the dispute resolution procedures described in Section8.6.  Not later than five days prior to the due date (including extensions)for filing such Tax Return, Seller shall deliver to Purchasers the amount ofthe Taxes shown to be due on such Tax Return.  Upon receipt thereof, Purchasersshall cause the Company to timely file such Tax Return and pay all Taxes duewith respect to such Tax Return.

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(c)               With respect to any Tax Return covering a taxable period beginning on orbefore the Closing Date and ending after the Closing Date that is required tobe filed after the Closing Date with respect to the Company, Purchasers shallcause such Tax Return to be prepared in a manner consistent with practicesfollowed in prior years, except as otherwise required by Law or fact, shallcause to be included in such Tax Return all Tax Items required to be includedtherein, and at least 15 days prior to the due date (including extensions) ofsuch Tax Return shall furnish a copy of such Tax Return to Seller.  Purchasersshall permit Seller to review and comment on such Tax Return and shall makesuch revisions to such Tax Return as reasonably requested by Seller. Purchasers and Seller shall work in good faith to agree upon the manner inwhich such Tax Return is prepared (including the treatment of any Tax Items onsuch Tax Return) and the Taxes attributable to the Pre-Closing Tax Period and,failing such agreement, shall resolve the matter in a manner consistent withthe dispute resolution procedures described in Section 8.6.  Notlater than five days prior to the due date (including extensions) for filingsuch Tax Return, Seller shall deliver to Purchasers the amount of Taxes shownto be due on such Tax Return that are attributable to the Pre-Closing TaxPeriod.  Upon receipt thereof, Purchasers shall cause the Company to timelyfile such Tax Return and pay all Taxes due with respect to such Tax Return.

(d)              To the extent permitted by Law or administrative practice, (i) thetaxable year of the Company that includes the Closing Date shall be treated asclosing at the time of the Closing, and (ii) all transactions occurring on theClosing Date but after the Closing occurs, shall be reported on the Tax Returnsof each Purchaser or its Affiliates in a manner similar to Treasury RegulationSection 1.1502-76(b)(1)(ii)(B).

(e)               For purposes of determining the Taxes attributable to a Pre-Closing TaxPeriod:  (i) in the case of Taxes that are either (x) based upon or related toincome or receipts, or (y) imposed in connection with any sale or othertransfer or assignment of property (real or personal, tangible or intangible),such Taxes shall be deemed equal to the amount which would be payable if thetaxable period ended on and included the Closing Date; and (ii) in the case ofTaxes imposed on a periodic basis or otherwise measured by the level of anyitem, deemed to be the amount of such Taxes for the entire period (or, in thecase of such Taxes determined on an arrears basis, the amount of such Taxes forthe immediately preceding period), multiplied by a fraction the numerator of whichis the number of days in the Pre-Closing Tax Period and the denominator ofwhich is the number of days in the entire taxable period.

(f)                If after the Closing Date any Purchaser or the Company receives a refundor utilizes a credit of any Tax for or on behalf of the Company attributable toa Pre-Closing Tax Period, such Purchaser shall pay to Seller within tenBusiness Days after such receipt or utilization an amount equal to such refundreceived or credit utilized (or so much of such refund or credit as relates tothe portion of the taxable period ending on or before Closing Date), togetherwith any interest received or credited thereon.  Such Purchaser shall, andshall cause the Company to, take such action to obtain a refund or creditattributable to a Pre-Closing Tax Period or to mitigate, reduce or eliminateany Taxes that could be imposed for a Pre-Closing Tax Period (including withrespect to the transactions contemplated hereby) as is reasonably requested bySeller.

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(g)               If after the Closing Date Seller receives a refund or utilizes a creditof any Tax attributable to a Post-Closing Tax Period of the Company, Sellershall pay to Purchasers (in accordance with their respective interests) withinten Business Days after such receipt or utilization an amount equal to suchrefund received or credit utilized (or so much of such refund or credit asrelates to the portion of the taxable period after the Closing Date), togetherwith any interest received or credited thereon.  Seller shall take such actionto obtain a refund or credit attributable to a Post-Closing Tax Period or tomitigate, reduce or eliminate any Taxes that could be imposed for aPost-Closing Tax Period as is reasonably requested by Purchasers; provided,however, that Seller shall have no obligation to take any action thatwould amend or otherwise affect any consolidated, combined or unitary TaxReturn that includes a Pre-Closing Tax Period.

***7.2             ******Access to Information***.

(a)               After the Closing Date, Seller and Purchasers shall grant each other (ortheir respective designees), and Purchasers shall cause the Company to grant toSeller (or its designees), access at all reasonable times to all of theinformation, books and records relating to the Company in its possession(including work papers and correspondence with taxing authorities), and shallafford such Party the right (at such Party's expense) to take extractstherefrom and to make copies thereof, to the extent reasonably necessary topermit preparation of Tax Returns, to defend charges by or conduct negotiationswith Taxing Authorities, and to implement the provisions of, or to investigateor defend any claims between the Parties arising under, this Agreement.

(b)              Each Purchaser and Seller will preserve and retain all schedules, workpapers and other documents relating to any Tax Returns of or with respect tothe Company or to any claims, audits or other proceedings affecting the Companyuntil the expiration of the statute of limitations (including extensions)applicable to the taxable period to which such documents relate or until thefinal determination of any controversy with respect to such taxable period, anduntil the final determination of any payments that may be required with respectto such taxable period under this Agreement.

***7.3             ******Indemnification by Seller***.

(a)               Seller hereby agrees to protect, defend, indemnify, and hold harmlesseach Purchaser and the Company from and against, and agrees to pay (i) anyTaxes of the Company attributable to a Pre-Closing Tax Period, net of any Taxbenefit actually realized or to be realized by such Purchaser, the Company, ortheir respective Affiliates with respect to such Taxes, (ii) any Taxes of anymember of an affiliated, consolidated, combined or unitary group of which theCompany is or was a member on or prior to the Closing Date, including pursuantto Treasury Regulation Section 1.1502-6 or any analogous or similar state orlocal Laws, and (iii) any liability arising from a breach by Seller of itscovenants set forth in this Article VII.  The Parties hereby expresslyagree and acknowledge that Taxes of the Company attributable to a Pre-ClosingTax Period shall include, without limitation, any gross receipts orcompensating tax, sales, use, privilege, or similar taxes or payments in lieuof taxes imposed on, in connection with, or with respect to (v) the purchase oruse of any equipment or other tangible personal property installed in or at theProject during a Pre-Closing Tax Period, or (w) the purchase and sale of anyservices provided to or in connection with the construction of, or theinstallation of equipment in or at, the Project during a Pre-Closing TaxPeriod.  Notwithstanding anything to the contrary in this Agreement, Sellershall not be liable for and shall not indemnify any Purchaser or the Companyagainst any liability for (x) any Transfer Taxes (other than such Taxes as maybe payable by Seller pursuant to the first two sentences of this Section7.3(a)), (y) any Taxes resulting from the termination of the Project Bondsor (z) any Taxes resulting from transactions which occur or actions taken bysuch Purchaser, the Company or any of their Affiliates at or after the Closingand that are not contemplated by this Agreement.

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(b)              Notwithstanding anything to the contrary contained in this Agreement, noclaim for Taxes shall be permitted under this Section 7.3 unless suchclaim is first made not later than 30 days after the expiration of theapplicable statute of limitations (including extensions) with respect to suchTaxes.

***7.4             ******Purchaser Tax Indemnification***.  Purchasersagree, jointly and severally, to protect, defend, indemnify and hold harmlessSeller from and against, and agree to pay (a) any Taxes of the Companyattributable to the time period after the Closing, (b) any Transfer Taxes(other than such Taxes as may be payable by Seller pursuant to the first twosentences of Section 7.3(a)), (c) any Taxes resulting from thetermination of the Project Bonds (d) any Taxes resulting from transactions oractions taken by Purchasers, the Company or any of their Affiliates at or afterthe Closing and that are not contemplated by this Agreement, or (e) anyliability arising from a breach by Purchasers of their covenants set forth inthis Article VII. 

***7.5             ******Tax Indemnification Procedures***. If a claim shall be made by anyTaxing Authority that, if successful, would result in the indemnification of aParty under this Agreement (referred to herein as the **"*TaxIndemnified Claim*"** and the **"*Tax Indemnified Party*"**,respectively), the Tax Indemnified Party shall promptly notify the Partyobligated under this Agreement to so indemnify (referred to herein as the **"*TaxIndemnifying Party*"**) in writing of such fact.

(a)               The Tax Indemnifying Party shall have the right, at its sole cost, tocontrol the defense, prosecution, settlement or compromise of the TaxIndemnified Claim, and the Tax Indemnified Party shall take such action inconnection with contesting a Tax Indemnified Claim as the Tax IndemnifyingParty shall reasonably request in writing from time to time, including theselection of counsel and experts and the execution of powers of attorney,provided that the Tax Indemnifying Party shall have agreed in writing to pay tothe Tax Indemnified Party all costs and expenses that the Tax Indemnified Partyincurs in connection with contesting such claim, including, without limitation,reasonable attorneys' and accountants' fees and disbursements.  The TaxIndemnified Party shall not make any payment of such claim for at least 30 days(or such shorter period as may be required by applicable Law) after the givingof the notice required by this Section 7.5(a), shall give to the TaxIndemnifying Party any information reasonably requested relating to such claim,and otherwise shall cooperate with the Tax Indemnifying Party in good faith inorder to contest effectively any such claim.

(b)              Subject to the provisions of this Section 7.5, the TaxIndemnified Party shall only enter into a settlement of such contest with theapplicable Taxing Authority or prosecute such contest to a determination in acourt or other tribunal of initial or appellate jurisdiction as instructed bythe Tax Indemnifying Party.

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(c)               If, after actual receipt by the Tax Indemnified Party of an amountadvanced by the Tax Indemnifying Party pursuant to this Section 7.5, theextent of the liability of the Tax Indemnified Party with respect to the claimshall be established by the final judgment or decree of a court or othertribunal or a final and binding settlement with an administrative agency havingjurisdiction thereof, the Tax Indemnified Party shall promptly repay to the TaxIndemnifying Party the amount advanced to the extent of any refund received bythe Tax Indemnified Party with respect to the claim together with any interestreceived thereon from the applicable Taxing Authority and any recovery of legalfees from such Taxing Authority, net of any Taxes as are required to be paid bythe Tax Indemnified Party with respect to such refund, interest or legal fees(calculated at the maximum applicable statutory rate of Tax in the year ofrecovery without regard to any other Tax Items).

(d)               The Parties agree that any payments made pursuant to this Section7.5 shall be treated as an adjustment to the Purchase Price.

***7.6             ******Conflict***.  In the event of a conflict betweenthe provisions of this Article VII and any other provisions of thisAgreement, this Article VII shall control.

***7.7             ******Transfer Taxes***.  Purchasers shall beresponsible for and shall pay promptly when due all Transfer Taxes (other thansuch Taxes as may be payable by Seller pursuant to the first two sentences of Section7.3(a)), resulting from the transactions contemplated by this Agreement. 

***7.8             ******Termination of Project Bonds****. *Purchasersshall be responsible for and shall pay promptly any Taxes arising from Seller'stermination of the Project Bonds prior to Closing.

**ARTICLE VIIIINDEMNIFICATION, LIMITATIONS OF LIABILITY,WAIVERS AND DISPUTE RESOLUTION**

***8.1             ******Indemnification***.

(a)               Subject to the limitations set forth elsewhere in this Article VIII,Seller agrees to indemnify, defend and hold harmless each Purchaser, each oftheir respective Affiliates and Representatives and the Company (collectively,the "***Purchaser Related Persons***"), from and against anyand all Losses incurred by any Purchaser Related Person resulting from orrelating to any of the following:

(i)                 Any breach of a representation or warranty made by Seller in thisAgreement; and

(ii)               The breach by Seller of, or default in the performance by Seller of, anycovenant, agreement or obligation to be performed by Seller pursuant to thisAgreement.

(b)              Subject to the limitations set forth elsewhere in this Article VIII,Purchasers, jointly and severally, hereby agree to indemnify, defend and holdharmless Seller and Seller's Affiliates and Representatives (collectively, the"***Seller Related Persons***") from and against any and allLosses incurred by any Seller Related Person resulting from or relating to anyof the following:

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(i)                 Any breach of a representation or warranty made by any Purchaser in thisAgreement; and

(ii)               The breach by any Purchaser of, or default in the performance by anyPurchaser of, any covenant, agreement or obligation to be performed by anyPurchaser pursuant to this Agreement.

(c)               Notwithstanding anything in this Agreement to the contrary, in no eventshall Seller or any of its Affiliates have any liability for, or be subject todamages relating to, any breach of a representation, warranty or covenant bySeller of which a Purchaser had Knowledge prior to the Closing Date.  

***8.2             ******Limitations of Liability***.  Notwithstandinganything to the contrary in this Agreement:

(a)               if a non-breaching Party fails to provide written notice to a breachingParty of an alleged breach of a representation or warranty in Articles III,IV or V within the time periods specified in Section 8.3,which notice specifies in reasonable detail the factual basis of the allegedbreach, such alleged breach shall be deemed, for all purposes, not to be abreach of such representation or warranty;

(b)              Seller shall not have any liability to Purchasers for breaches ofrepresentations and warranties in this Agreement until the aggregate amount ofall Losses incurred by Purchasers equals or exceeds $10,000,000 in the case ofLosses for claims arising under Section 4.15 or $750,000, in the case ofall other Losses (in each such case, the **"*Seller Deductible Amount*"**),in which event Seller shall be liable for Losses only to the extent there areLosses in excess of the Seller Deductible Amount;

(c)               Purchasers shall not have any liability to Seller for breaches ofrepresentations and warranties in this Agreement until the aggregate amount ofall Losses incurred by Seller equals or exceeds $750,000 (the **"*PurchaserDeductible Amount*"**), in which event Purchasers shall be liable forLosses only to the extent there are Losses in excess of the PurchaserDeductible Amount;

(d)              in no event shall the aggregate liability of Seller or Purchasers, asthe case may be, arising out of or relating to this Agreement, whether relatingto breach of representation and warranty, covenant, agreement or obligation(other than Purchasers' obligation to pay the Purchase Price, which shall belimited to the Purchase Price), whether based on contract, tort, other Laws orotherwise, exceed 75% of the Purchase Price; 

(e)               The Parties shall have a duty to undertake commercially reasonableefforts to mitigate any Loss as to which an indemnity obligation applies hereunder;

(f)                Seller shall have no obligation to indemnify any Purchaser for anyLosses occurring after Closing that represent the cost of repairs, replacementsor improvements which enhance the value of the repaired, replaced or improvedasset above its value on the Closing Date or that represent the cost of repairsor replacements exceeding the lowest reasonable cost of repair or replacement;

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(g)               Seller's liability for and Purchasers' sole and exclusive remedies forany breach of Seller's representations and warranties set forth in Section4.9 (Taxes) and any breach of Seller's covenants set forth in ArticleVII shall be solely as provided for in Article VII; and

(h)               Purchasers' liability for and Seller's sole and exclusive remedies forany breach of Purchasers' covenants set forth in Article VII shall besolely as provided for in Article VII.

***8.3             ******Limited Claim Period***.  No Party shall make orbring any claim for indemnification relating to or pursuant to therepresentations and warranties contained in Articles III, IV and Vsubsequent to the date that is 18 months after the Closing Date.

***8.4             ******Waiver of Other Representations***.

(a)               NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, ITIS THE EXPLICIT INTENT OF EACH PARTY HERETO THAT NEITHER SELLER NOR ANY OF ITSAFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY REPRESENTATION ORWARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL, INCLUDING ANY IMPLIEDREPRESENTATION OR WARRANTY AS TO CONDITION, MERCHANTABILITY, USAGE, SUITABILITYOR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO THE SUBJECT COMPANYINTERESTS, THE COMPANY OR ANY OF THE PURCHASED ASSETS, OR ANY PART THEREOF,EXCEPT THOSE REPRESENTATIONS AND WARRANTIES EXPRESSLY CONTAINED IN ARTICLESIII AND IV.

(b)              EXCEPT AS OTHERWISE EXPRESSLY PROVIDED HEREIN, SELLER'S INTERESTS IN THECOMPANY AND THE PURCHASED ASSETS ARE BEING TRANSFERRED THROUGH THE SALE OF THESUBJECT COMPANY INTERESTS "AS IS, WHERE IS, WITH ALL FAULTS," ANDSELLER EXPRESSLY DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND ORNATURE, EXPRESS OR IMPLIED, AS TO THE CONDITION, VALUE OR QUALITY OF THECOMPANY AND ITS ASSETS OR THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS ANDOTHER INCIDENTS OF THE COMPANY AND ITS ASSETS.

***8.5             ******Waiver of Remedies***.

(a)               The Parties hereby agree to limit their recourse for all matters, andnot make any Claim for any Loss or other matter, under, relating to or arisingout of this Agreement or any other document, agreement, certificate or othermatter delivered pursuant hereto, except for claims for indemnification for breachof the representations, warranties, covenants, indemnities, agreements andobligations set forth in this Agreement and proceedings to enforce such claimsin compliance with Sections 8.6 and 8.7.

(b)              NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS AGREEMENT, NOPARTY SHALL BE LIABLE FOR SPECIAL, PUNITIVE, EXEMPLARY, INCIDENTAL,CONSEQUENTIAL OR INDIRECT DAMAGES, INCLUDING LOST PROFITS, WHETHER BASED ONCONTRACT, TORT, OTHER LAW OR OTHERWISE AND WHETHER OR NOT ARISING FROM THESOLE, JOINT OR CONCURRENT NEGLIGENCE, STRICT LIABILITY OR OTHER FAULT OF THEOTHER PARTY OR PARTIES.

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(c)               Notwithstanding anything to the contrary contained in this Agreement, noSeller Related Person shall have any personal liability to any Purchaser or anyother Person as a result of the breach of any representation, warranty,covenant or agreement of Seller contained herein and no Purchaser RelatedPerson shall have any personal liability to Seller or any other Person as aresult of the breach of any representation, warranty, covenant or agreement ofany Purchaser contained herein.

***8.6             ******Dispute Resolution***.  Any dispute or claimarising under this Agreement that is not resolved in the ordinary course ofbusiness shall be referred to a senior executive (President or a VicePresident) of each Purchaser and Seller, with authority to decide or resolvethe matter in dispute, for review and resolution.  Such senior executives shallmeet and in good faith attempt to resolve the dispute within thirty(30) days.  If the Parties are unable to resolve a dispute pursuant tothis Section 8.6, any Party may enforce its rights at law or in equitysubject to the provisions of this Agreement.

***8.7             ******Procedure for Indemnification - Third-Party Claims***.

(a)               If any Party shall claim indemnification hereunder arising from anyClaim of a third party, the Party seeking indemnification (the **"*IndemnifiedParty*"**) shall notify the Party from whom indemnification is sought(the **"*Indemnifying Party*"**) in writing of the basis forsuch Claim setting forth the nature of the Claim in reasonable detail.  Thefailure of the Indemnified Party to so notify the Indemnifying Party shall notrelieve the Indemnifying Party of any indemnification obligation hereunderexcept to the extent that the defense of such Claim is prejudiced by the failureto give such notice.

(b)              If any proceeding is brought by a third party against an IndemnifiedParty and the Indemnified Party gives notice to the Indemnifying Party pursuantto this Section 8.7, the Indemnifying Party shall, unless the Claiminvolves Taxes, be entitled to participate in such proceeding and, to theextent that it wishes, to assume the defense of such proceeding, if (i) theIndemnifying Party notifies the Indemnified Party in writing that, with respectto such Claim, the Indemnifying Party will indemnify the Indemnified Party forany Loss that results from the disposition of such Claim, (ii) the IndemnifyingParty provides written notice to the Indemnified Party that the IndemnifyingParty intends to undertake such defense, (iii) the Indemnifying Party conductsthe defense of the third-party Claim actively and diligently with counselreasonably satisfactory to the Indemnified Party and (iv) the IndemnifyingParty has determined in good faith that joint representation would not beinappropriate because of a conflict in interest if the Indemnifying Party is aparty to the proceeding.  The Indemnified Party shall, in its sole discretion,have the right to employ separate counsel (who may be selected by theIndemnified Party in its sole discretion) in any such action and to participatein the defense thereof, and the fees and expenses of such counsel shall be paidby such Indemnified Party.  The Indemnified Party shall fully cooperate withthe Indemnifying Party and its counsel in the defense or compromise of suchClaim.  If the Indemnifying Party assumes the defense of a proceeding, nocompromise or settlement of such Claims may be effected by the IndemnifyingParty without the Indemnified Party's consent unless (A) there is no finding oradmission of any violation of law or any violation of the rights of any Personand no effect on any other Claims that may be made against the IndemnifiedParty and (B) the sole relief provided is monetary damages that are paid infull by the Indemnifying Party.

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(c)               If (i) notice is given to the Indemnifying Party of the commencement ofany third-party legal proceeding and the Indemnifying Party does not, withinten days after the Indemnified Party's notice is given, give notice to theIndemnified Party of its election to assume the defense of such legalproceeding, or (ii) any of the conditions set forth in clauses (i) through(iii) of Section 8.7(b) become unsatisfied, the Indemnified Party shall(upon notice to the Indemnifying Party) have the right to undertake the defense,compromise or settlement of such claim; *provided* that the IndemnifyingParty shall reimburse the Indemnified Party for the costs of defending againstthe third-party claim (including reasonable attorneys' fees and expenses) andthe Indemnifying Party shall remain responsible for any indemnifiable amountsarising from or related to such third-party claim to the fullest extentprovided in this Article VIII.  The Indemnifying Party may elect toparticipate in such legal proceedings, negotiations or defense at any time atits own expense.

(d)        If the IndemnifiedParty has determined in good faith that (i) joint representation under clause(b)(iv) would be inappropriate because of a conflict of interest if theIndemnifying Party is a party to the proceeding, or (ii) that there is areasonable probability that a legal proceeding may adversely affect it otherthan as a result of monetary damages for which it would be entitled toindemnification from the Indemnifying Party under this Agreement, theIndemnified Party shall so notify the Indemnifying Party, and neither theIndemnifying Party nor such Indemnified Party shall be entitled to assume thedefense of the other in the proceeding and each of the Indemnifying Party andthe Indemnified Party shall be entitled to participate in such proceeding inits own defense at its own expense.  Nothing in this paragraph (d) shall limitthe Indemnifying Party's indemnification obligations, if any, resulting fromthe resolution of the Claims which are the basis for such proceeding.

**ARTICLE IXMISCELLANEOUS**

***9.1             ******Notices***.

(a)               Unless this Agreement specifically requires otherwise, any notice,demand or request provided for in this Agreement, or served, given or made inconnection with it, shall be in writing and shall be deemed properly served,given or made if delivered in person or sent by facsimile or sent by registeredor certified mail, postage prepaid, or by a nationally recognized overnightcourier service that provides a receipt of delivery, in each case, to theParties at the addresses specified below:

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If to Purchasers, to:

PNM Resources, Inc.AlvaradoSquareAlbuquerque, NewMexico  87158Facsimile No.: 505-241-2368Attn: Secretary

with a copy to:

Public Service Company of New MexicoEnergy Supply and Marketing2401 Aztec N.E.Albuquerque, NewMexico   87107Facsimile No.: 505-855-6240Attn:  Melvin J. Christopher

And

Tucson Electric Power Companyc/o UniSource Energy CorporationOne South Church Avenue, Suite  1820Tucson, Arizona85701Facsimile No.: 520-884-3612Attn:  Michael J. DeConcini

with a copy to:

Tucson Electric Power Companyc/o UniSource Energy CorporationOne South Church Avenue, Suite  1820Tucson, Arizona 85701Facsimile No.:  520-884-3612Attn:  General Counsel 

And

Phelps Dodge Energy Services, LLCc/o Phelps Dodge CorporationOne North Central Avenue, 17/FPhoenix, Arizona 85004-2306Facsimile No.:  602-366-7315Attn:  Choi Lee

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with copy to:

Phelps Dodge Energy Services, LLCc/o Phelps Dodge CorporationOne North Central AvenuePhoenix, Arizona 85004-2306Facsimile No.:  602-366-7311Attn:  General Counsel

If to Seller, to:

Duke Energy North America, LLC5400 Westheimer CourtHouston, Texas 77056-5310Facsimile No.:  713-627-6544Attn:  Stuart R. Zisman

with copy to:

Duke Energy North America, LLC5400 Westheimer CourtHouston, Texas 77056-5310Facsimile No.:  713-627-5585Attn:  General Counsel

(b)              Notice given by personal delivery, mail or overnight courier pursuant tothis Section 9.1 shall be effective upon physical receipt.  Notice givenby facsimile pursuant to this Section 9.1 shall be effective as of  thedate of confirmed delivery if delivered before 5:00 p.m. Central Time on anyBusiness Day or  the next succeeding Business Day if confirmed delivery isafter 5:00 p.m. Central Time on any Business Day or during any non-BusinessDay.

***9.2             ******Entire Agreement***.  This Agreement supersedesall prior discussions and agreements between the Parties with respect to thesubject matter hereof and contains the sole and entire agreement between theParties with respect to the subject matter hereof.

***9.3             ******Expenses***.  Except as otherwise expresslyprovided in this Agreement, each Party will pay its own costs and expensesincurred in anticipation of, relating to and in connection with the negotiationand execution of this Agreement and the transactions contemplated hereby.

***9.4             ******Public Announcements***.  Except as may berequired by Law or any applicable stock exchange rules, neither Seller nor anyPurchaser will issue or make, and each will cause the Company not to issue ormake, any press releases or other public disclosures concerning this Agreementor the transactions contemplated hereby without first obtaining consent fromthe other Party or Parties, which consent shall not be unreasonably withheld,conditioned or delayed.

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***9.5             ******Confidential Information***.

(a)               For two years from and after the Closing Date, Seller shall cause anydata or information received at any time by Seller or any Seller Related Personfrom any Purchaser and any data or information regarding the Company or itsbusinesses, operations, financial conditions or prospects, to be maintained bySeller and the Seller Related Persons in confidence, not to be utilized for anypurpose and not to be disclosed for any purpose.

(b)              With respect to the obligations under Section 9.5(a), in theevent that any Person subject to confidentiality thereunder is requested orrequired (by oral question or request for information or documents in any legalproceeding, interrogatory, subpoena, civil investigative demand or similarprocess) to disclose any such information, Seller shall use commerciallyreasonable efforts to cause such Person to notify the Parties to whom suchconfidential information relates promptly of such request or requirement sothat such Parties may seek an appropriate protective order or waive compliancewith the provisions of this Section 9.5.  If, in the absence of aprotective order or the receipt of a waiver hereunder, such Person, on theadvice of counsel, is compelled to disclose any such information to anyGovernmental Authority, such Person may disclose such information to suchGovernmental Authority; provided that Seller  shall cause such disclosingPerson to use commercially reasonable efforts to obtain an order or otherassurance that confidential treatment will be accorded to such portion of suchinformation required to be disclosed.

(c)               Notwithstanding the foregoing, the confidentiality obligations set forthin this Section 9.5 shall not apply to any disclosure of information:

(i)                 which at the time of disclosure is already in the public domain throughno fault of the applicable Persons;

(ii)               which after disclosure becomes part of the public domain through no actor fault of the applicable Persons;

(iii)              if such information subsequently becomes known to the applicable Personsthrough no breach of their obligations hereunder;

(iv)             which is independently developed or known by the applicable Personsthrough no breach of their obligations hereunder; or

(v)               required by Law or stock exchange rules; provided that the applicablePersons shall use, and shall cause their applicable Affiliates, if any, to use,commercially reasonable efforts to give the other Parties prior notice of suchdisclosure in sufficient time to enable such other Parties to protect any suchinformation.

***9.6             ******Disclosure***.  Seller may, at its option,include in the Schedules items that are not material in order to avoid anymisunderstanding, and any such inclusion, or any references to dollar amounts,shall not be deemed to be an acknowledgment or representation that such itemsare material, to establish any standard of materiality or to define further themeaning of such terms for purposes of this Agreement.  Information disclosed inthe Schedules shall constitute a disclosure for all purposes under thisAgreement notwithstanding any reference to a specific Section, and all suchinformation shall be deemed to qualify the entire Agreement and not just suchsection. * *

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***9.7             ******Waiver***.  Any term or condition of thisAgreement may be waived at any time by the Party that is entitled to thebenefit thereof, but no such waiver shall be effective unless set forth in awritten instrument duly executed by or on behalf of the Party waiving such termor condition. No waiver by any Party of any term or condition of thisAgreement, in any one or more instances, shall be deemed to be or construed asa waiver of the same or any other term or condition of this Agreement on anyfuture occasion. All remedies, either under this Agreement or by Law orotherwise afforded, will be cumulative and not alternative.

***9.8             ******Amendment***.  This Agreement may be amended,supplemented or modified only by a written instrument duly executed by or onbehalf of each Party.

***9.9             ******No Third Party Beneficiary***.  Except forPurchaser Related Persons and Seller Related Persons constituting IndemnifiedParties, the terms and provisions of this Agreement are intended solely for thebenefit of the Parties and their respective successors or permitted assigns,and it is not the intention of the Parties to confer third-party beneficiaryrights upon any other Person.

***9.10         ******Assignment; Binding Effect***. 

(a)        A Purchaser may assign its rights andobligations hereunder to an Affiliate without Seller's consent but suchassignment shall not release such Purchaser from its obligations hereunder. 

(b)        Except as provided in Section 9.10(a),neither this Agreement nor any right, interest or obligation hereunder may beassigned by any Party without the prior written consent of the other Parties,and any attempt to do so will be void, except for assignments and transfers byoperation of Law.

(c)        Subject to this Section 9.10, thisAgreement is binding upon, inures to the benefit of and is enforceable by theParties and their respective successors and assigns.

***9.11         ******Headings***.  The headings used in this Agreementhave been inserted for convenience of reference only and do not define or limitthe provisions hereof.

***9.12         ******Invalid Provisions***.  If any provision of thisAgreement is held to be illegal, invalid or unenforceable under any present orfuture Law, and if the rights or obligations of any Party under this Agreementwill not be materially and adversely affected thereby,  such provision will befully severable,  this Agreement will be construed and enforced as if suchillegal, invalid or unenforceable provision had never comprised a part hereof, the remaining provisions of this Agreement will remain in full force and effectand will not be affected by the illegal, invalid or unenforceable provision orby its severance herefrom and in lieu of such illegal, invalid or unenforceableprovision, there will be added automatically as a part of this Agreement alegal, valid and enforceable provision as similar in terms to such illegal,invalid or unenforceable provision as may be possible.

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***9.13         ******Counterparts; Facsimile***.  This Agreement maybe executed in any number of counterparts, each of which will be deemed anoriginal, but all of which together will constitute one and the sameinstrument.  Any facsimile copies hereof or signature hereon shall, for allpurposes, be deemed originals.

***9.14         ******Governing Law; Venue; and Jurisdiction***.

(a)               This Agreement shall be governed by and construed in accordance with theLaws of the State of New York, without giving effect to any choice orconflict of law provision other than Section 5-1401 of the New York GeneralObligation Law.

(b)              THE PARTIES HEREBY IRREVOCABLY SUBMIT TO THE NON-EXCLUSIVE JURISDICTIONOF ANY STATE OR FEDERAL COURT IN NEW YORK, NEW YORK IN THE BOROUGH OF MANHATTAN FOR THE PURPOSES OF ANY ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT ORRELATING TO THE SUBJECT MATTER HEREOF.

(c)               EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANYRIGHT IT MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIMARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISINGHEREUNDER.

***9.15         ******Attorneys' Fees******.***  If a Partyshall bring an action to enforce the provisions of this Agreement, theprevailing Party shall be entitled to recover its reasonable attorneys' feesand expenses incurred in such action from the unsuccessful Party or Parties, asthe case may be.

**[signature pagefollows]**

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**IN WITNESS WHEREOF**, this Purchase and SaleAgreement has been duly executed and delivered by the duly authorized officerof each Party as of the date first above written.

**DUKE ENERGY NORTH AMERICA, LLC**

By:           /s/ Stuart R.Zisman                                    

Name:       Stuart R. Zisman                                         

Title:         Vice President                                            

**PHELPS DODGE ENERGY SERVICES,LLC**

By:           /s/ W.S. Brack                                           

Name:       W.S. Brack                                                

Title:         President                                                    

 

** **

**PNM RESOURCES, INC.**

By:           /s/ Hugh W.Smith                                      

Name:       Hugh W. Smith                                           

Title:         Senior VicePresident                                 

 

** **

**TUCSON ELECTRIC POWER COMPANY**

By:           /s/ Michael J.DeConcini                             

Name:      Michael J. DeConcini                                   

Title:         Senior VicePresident