Texas New Mexico Power 10-Q 2005 Q2 Quarterly report

Exhibit 10.86.1

[*] Indicates that the confidential portion has been omitted from this filed exhibit and filed separately with
      the Securities and Exchange Commission

AMENDMENT THREE TO UNDERGROUND COAL SALES AGREEMENT

THIS AMENDMENT THREE TO UNDERGROUND COAL SALES AGREEMENT ("Amendment Three"), by and between SAN JUAN COAL COMPANY, a Delaware corporation (referred to herein as "SJCC") and PUBLIC SERVICE COMPANY OF NEW MEXICO, a New Mexico corporation, and TUCSON ELECTRIC POWER COMPANY, an Arizona corporation (collectively referred to herein as the "Utilities") (with SJCC and Utilities herein sometimes collectively referred to as "Parties"), amends that certain Underground Coal Sales Agreement dated August 31, 2001 as amended (the "UG-CSA") between SJCC and the Utilities.

RECITALS

WHEREAS, the Parties wish to restate Section 8.3 "Coal Processing Component" of the UG-CSA. 

NOW THEREFORE, in consideration of the terms, covenants and agreements contained in this Amendment Three and for other good and valuable consideration, the Utilities jointly and severally agree with SJCC as follows:

AGREEMENT

1.      Section 8.3(A)(1) of the UG-CSA is modified by replacing the value "[*]" with the value "[*]" in the formula contained in that section.  This change shall be effective as of January 1, 2003. 

2.      Section 8.3(A)(3) of the UG-CSA is modified by replacing the last paragraph of that section, that begins: "In no event.", and ends with the end of the section, with the paragraph:

"In no event shall the inflation-deflation adjustment cause the Processing CIE_Eligible-Adj to be less than Processing CIE_min where Processing CIE_min is calculated as follows:

Processing CIE_min = [*]

or the Processing CIE_Non-elg-Adj to be less than:

Processing CIE_min  [divided by *]

3.      All other provisions of the UG-CSA not specifically amended by this Amendment Three remain in full force and effect.

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed on their behalf by their respective officers, thereunto duly authorized.

Public Service Company of New Mexico

By:       /s/ Hugh W. Smith                                                       
Name:       Hugh W. Smith                                                       
Title:           Senior VP, Energy Resources                                                   Date: April 29, 2005

Tucson Electric Power Company

By:       /s/ Michael J. DeConcini                                               
Name:       Michael J. DeConcini                                                
Title:           SR Vice President                                                                        Date: May 2, 2005

San Juan Coal Company

By:       /s/ Gary Lansdale                                                         
Name:  Gary Lansdale                                                              
Title:     VP SJCC                                                                                             Date:  April 28, 2005

CONSENT OF GUARANTOR

BHP Minerals International Inc., a Delaware corporation, (formerly BHP-Utah International Inc.), the guarantor of the obligations of San Juan Coal Company under the Underground Coal Sales Agreement pursuant to the Guarantee dated September 25, 2001 (the Guarantee"), hereby consents to the foregoing Amendment Three to the Underground Coal Sales Agreement and agrees that all references in the Guarantee to the Underground Coal Sales Agreement shall be deemed to be references to the Underground Coal Sales Agreement as amended by this Amendment Three.

BHP Minerals International, Inc.

By:       /s/ Earl K. Moore                                                        
Name:       Earl K. Moore                                                       
Title:          CEO & President                                                                        Date:    May 10, 2005                                     

By:       /s/ M. Ruth Rhodes                                                  
Name:     M. Ruth Rhodes                                                     
                        Secretary                                                                               Date:                May 11, 2005                         

(Corporate Seal)