AMENDMENT NO. 2 TO FUEL SUPPLY AGREEMENT
This Amendment to Fuel Supply Agreement (the "Amendment") is made and entered
into as of the 29th day of November, 1994, by and between Texas-New Mexico
Power Company ("TNP") and Walnut Creek Mining Company ("Walnut Creek") and
amends the Fuel Supply Agreement dated as of November 18, 1987, as amended (the
"Agreement") entered into by and between TNP and Phillips Coal Company.
Capitalized terms not defined herein shall be given the same meaning ascribed
to such terms in the Agreement. This Amendment is made with respect to the
following facts:
(a) Effective May 10, 1988, the Agreement was assigned by Phillips Coal
Company to Walnut Creek.
(b) The Parties desire to amend the Agreement as set forth in this Amendment.
In consideration of the recitals set forth above which are hereby made a part
of this Amendment, the Parties agree as follows:
1. Section 4.01(A) of the Agreement shall be deleted in its entirety and
replaced by the following:
Except as otherwise specifically provided in this Section 4.01(A) and subject
to the provisions of Article 12 of this Agreement, during the Term hereof, TNP
shall purchase and Walnut Creek shall deliver all of the solid fuel
requirements for each of the Units (such solid fuel requirements to be
Lignite); provided, however, that at a minimum, TNP shall purchase and Walnut
Creek shall deliver for each Year during the Term hereof the Annual Lignite
Quantity as set forth in Exhibit C; and, provided further, that to the extent
of the then remaining Allowed Shortfall as determined in accordance with
Section 4.04 of this Agreement, TNP must take delivery of not less than 90
percent of the Annual Lignite Quantity in any Year. Notwithstanding the
preceding sentence, in any Year during the Term hereof, TNP may purchase from
sources other than Walnut Creek no more than 540,000 Dths of an alternate fuel
(equivalent to 40,000 tons of Lignite) to be used solely by TNP for testing
purposes and a quantity of natural gas to be used in start-ups with respect to
the Units. TNP may elect to prepay at any time any or all amounts it determines
may in the future be due Walnut Creek as a result of TNP's failure to receive
the Adjusted Lignite Quantity in a Year.
2. Section 4.01(C) of the Agreement shall be deleted in its entirety.
3. The second and third sentences of Section 4.02 of the
Agreement shall be deleted in their entirety.
4. Section 4.04 of the Agreement shall be deleted in its
entirety and replaced by the following:
Allowed Shortfall shall not exceed 15,934,731 Dths. To the
extent that there remains Allowed Shortfall, TNP may f ail to
take delivery in any Year of an amount of Lignite equal to no
more than 10 percent of the Annual Lignite Quantity for such
Year. In such event, TNP must choose either (i) to allocate such
amount not taken as a deduction from the then remaining balance
of Allowed Shortfall, or (ii) to pay for such amounts as Make-up
pursuant to Section 4.05.
5. The last two sentences of the second paragraph of Section
4.05 of the Agreement shall be deleted in their entirety.
6. Section 4.06 of the Agreement shall be deleted in its
entirety.
7. Add the following to Section 6.01(c) of the Agreement:
Notwithstanding anything to the contrary in this Agreement,
effective January 1, 1995, the Base Price of Lignite shall be
$1.295 per Dth for all Lignite purchased and delivered.
8. The fifth, sixth, and seventh sentences of the first
paragraph of Section 6.02 of the Agreement shall be deleted in
their entirety and replaced by the following:
Price redetermination proceedings and the implementation of a new
price for Lignite may occur no more often than one time every
five years. Walnut Creek may request the next price
redetermination which shall be effective no earlier than January
1, 2000, by delivering such request in writing to TNP no later
than September 1, 1999. Such new price shall continue in effect
for a period of five years. If Walnut Creek fails to request
such price redetermination, then TNP may request a price
redetermination which shall be effective no earlier than January
1, 2001, by delivering such request in writing to Walnut Creek no
later than September 1, 2000. Such new price shall continue in
effect for a period of five years. Thereafter, either Party may
request in writing a market price redetermination no later than
September 1 of the Year preceding January 1 of the Year when a
new price may become effective; provided, however, that such a
new price for Lignite may occur no more often than one time every
five years. If neither Party requests a reopener, the then
existing Adjusted Base Price shall continue in force.
9. A new Section 8.06 shall be added to the Agreement as
follows:
2
Section 8.06. Audit of TNP by Walnut Creek. TNP shall maintain
accurate, complete, and timely books and records of all purchases
of fuel for the Units in order that the provisions of this
Agreement can adequately be administered. Once each year, Walnut
Creek or its employees, agents, or representatives, shall have
the right to enter upon the premises of TNP at reasonable times
and to conduct an audit of such purchases at the sole expense of
Walnut Creek. Walnut Creek shall furnish to TNP a copy of the
audit report upon its completion. In the event TNP disagrees
with the audit report, the Parties shall cooperate in an attempt
to resolve any differences regarding the audit report. If any
differences regarding the audit report are not resolved within 30
days following delivery of the audit report to TNP, then the
controversy shall be submitted for resolution in accordance with
Section 8.05.
10. Walnut Creek shall update the Manning Table for the Two
Unit Plan as set forth in Exhibit E in order to arrive at an
average hourly rate to be effective as of January 1, 1995, as
soon as practicable upon the availability of the necessary
information to make such determination.
11. Exhibit F to the Agreement shall be deleted in its entirety
and replaced by the attached Amended Exhibit F.
12. Except as set forth in this Amendment, all other provisions
of the Agreement shall remain unchanged and in full force and
effect. However, to the extent that there is any inconsistency
between the Agreement and this Amendment, this Amendment shall
control.
13. This Amendment shall be effective as of January 1, 1995.
IN WITNESS WHEREOF, the Parties have caused their authorized
representatives to execute this Amendment as of the day and year
first above written.
TEXAS-NEW MEXICO POWER COMPANY
By: Randy Ownby
Title: Assistant Vice President
Resource Acquisition & Management
WALNUT CREEK MINING COMPANY
By: Bruce Grewcock
Title: Member, Management Committee
3
AMENDED
EXHIBIT F
TO
FUEL SUPPLY AGREEMENT
Adjustments to Base Price
Section F.01. Components. The Base Price for Lignite as set out in
Section 6.01 is made up of the following components:
Base Price of Components per Dth
(January 1, 1995)
Two Unit
Section Plan
Price Components
F.04 Capital $0.295
F.05 Labor 0.296
F.09 General and Administrative 0.042
F.06 Supplies 0.289
F.07 Power Costs 0.032
F.08 Taxes and Regulatory 0.042
Requirements
F.09 Other Items 0.221
F.09.1 1996 Price Component $0.025
F.09.2 1998 Price Component $0.025
Sub-Total: 1.217
(Pre-Royalty Base Price)
F.10 Royalties (6% of Total 0.078
Base Price)
Total Base Price: $1.295
*Effective January 1, 1996
**Effective January 1, 1998
The components of the various Base Prices set forth above ("Price
Components") shall be referred to in this Agreement as the "Capital
Component", the "Labor Component", the "General and Administrative
Component", the "Supplies Component", the "Power Costs Component", the
"Taxes and Regulatory Requirements Component", the "Other Items
Component", which includes the 1996 and 1998 Price Components referred
to in Section F.09.1 and F.09.2, and the "Royalties Component",
respectively. The Components are expressed in terms of dollars per Dth.
EXHIBIT F - Page 1
Section F.02 Adjustments - General. Except for adjustments
relating to the Price Components described in Sections F.05,
F.07, F.08 and F.10 (which adjustments will be made as changes
occur), adjustments to the Price components shall be made on the
Adjustment Dates with the first adjustment being made on April 1,
1995 (April 1, 1996 for Section F.09.1; April 1, 1998 for Section
F.09.2). TNP shall bear only that portion of the changes in costs
and expenses (which give rise to adjustments in the Base Prices)
applicable to the Lignite. On each Adjustment Date, each Price
Component of the then applicable Base Price shall be adjusted in
- accordance with Sections F.04, F.06 and F.09 and the sum of the
Price Components, as adjusted, will be the Adjusted Base Price to
be charged per Dth for Lignite until the next Adjustment Date,
subject, however, to the other adjustments provided for in this
Agreement. In the event of the unavailability of any index
described in this Amended Exhibit F, adjustments to the Base
Prices shall be computed using any available conversion tables of
the U.S. Department of Labor and otherwise by mutual agreement of
the Parties.
Section F.03. Formulae. With the exception of F.09.1 and F.09.2,
the denominators of all fractions which are set forth in this
Amended Exhibit F, and which are based on the CPI or PPI, are
based on the CPI or the PPI (as the case may be) for December
1994. The denominators for the fractions set forth in Section
F.09.1 and F.09.2 are based on the CPI for December, 1995 and
December, 1997, respectively.
Section F. 04. Capital component Adjustment. The Capital
Component, which has been established to reflect Walnut Creek's
ownership of all equipment and facilities necessary to develop
and operate the Mine throughout the Term, shall be adjusted on
each Adjustment Date according to the following formula wherein C
is expressed in dollars per Dth:
C = (X) (0.295)
--------------
(Y)
WHERE:
X = the PPI for Construction Machinery and Equipment (Commodity
Code 112) for the second month preceding the Adjustment Date
and
Y = The PPI for Construction Machinery and Equipment (Commodity
Code 112) for the month of December 1994.
Section F.05. Labor Component Adjustment. The Labor Component,
which includes all hourly labor, salary labor and payroll burdens
(including benefits and payroll taxes) at the Mine, shall be
adjusted to allow for changes in Walnut Creek's base weighted
average hourly wage rate. The weighted average hourly wage rate
(on a non-union basis) attributable to the Lignite as of
EXHIBIT F - Page 2
January 1, 1995 for the Two Unit Plan is reflected in the Manning
Table to be updated by Walnut Creek and attached as Exhibit E.
(To be prepared as soon as practicable upon the availability of
the necessary information.)
The Parties recognize that the purpose of the Manning Tables are
to periodically recalculate weighted average hourly wage rates,
and that they do not necessarily reflect the number of people at
the Mine at any given time. The number of people in the Manning
Tables shall not be changed nor shall new categories be added
unless the labor force at the Mine is represented under a
collective bargaining agreement, or unless legislation enacted
after January 1, 1987 requires such change. In this event,
Walnut Creek will advise TNP of such changes and persons will be
added or removed at the appropriate rate to enable determination
of a new weighted hourly base wage rate. In addition to the
hourly wage rate adjustments and revisions, whenever a new labor
or laborrelated cost not reflected in the Manning Table is
incurred on a per Dth basis, Walnut Creek shall add that cost to
the price of Lignite and recover that cost and any adjustments to
that cost separately as a direct pass-through.
Should revisions to the Manning Tables be required because of,
without limitation, changes in job classifications, work
practices and overtime requirements under a collective bargaining
agreement, these revisions shall not go into effect until two (2)
years after the date on which the collective bargaining agreement
was executed.
The adjusted Labor Component which will become a part of the
Adjusted Base Price to be computed on each Adjustment Date will
be equal to L (expressed in dollars per Dth) in the following
formula:
L = (0.296) (X)
-------------
(Y)
WHERE:
X = the weighted average hourly- wage rate for- labor attributed
to the Lignite as of the Adjustment Date, as determined based
upon the applicable Manning Table attached as Amended Exhibit E;
and
Y = the applicable weighted average hourly base wage rate set
forth on Amended Exhibit E attributable to the Lignite as of
January 1, 1995.
Section F.06. Supplies Component Adjustment. The applicable Base
Price shall be adjusted to allow for changes in the cost of
supplies purchased by Walnut Creek and used in the production of
the Lignite. The adjusted Supplies Component, which will become
a part of the Adjusted Base Price to be computed on each
Adjustment Date, will be equal to S (expressed in dollars per
Dth) in the following formula:
EXHIBIT F - Page 3
TWO UNIT PLAN
FORMULA
S = (0.289) (.111)(A) + (.055)(B) + (.066)(C) +
---------- ----------- -----------
(Y) (Y) (Y)
(.581)(D) + (.187)(E)
---------- -----------
(Y) (Y)
WHERE:
A = the PPI for Number 2 Diesel Fuel (Commodity Code 057303)
for the second month preceding the Adjustment Date;
B = the PPI for Finished Lubricants (Commodity Code 0576) for
the second month preceding the Adjustment Date;
C = the PPI for Rubber and Rubber Products (Commodity Code 071)
for the second month preceding the Adjustment Date;
D = the PPI for Parts and other Equipment (Commodity Code 1126)
for the second month preceding the Adjustment Date; and
E = the PPI for Industrial Commodities (Commodity Code 03 THRU
15) for the second month preceding the Adjustment Date.
Y = Applicable PPI index for A, B, C, D or E for the month of
December, 1994.
Section F.07. Power Costs Component Adjustment. The applicable
Base Prices shall be adjusted to allow for changes in the costs
to Walnut Creek of electric power attributable to the production
of the Lignite. The Power Costs Component will be determined
monthly and will be equal to the actual cost of electric power
for the Mine during the preceding month divided by the number of
Dths of Lignite billed during the current month.
Section F. O8. Taxes and Regulatory Requirements Component
Adjustment. The applicable Base Prices shall be adjusted to
compensate for changesin the amounts of the following, as and
when said changes occur: (a) State of Texas Severance Taxes, (b)
Federal Surf ace Mine Reclamation Fees, (c) Texas Resource Excise
Taxes, (d) Texas Conservation Taxes, (e) the reasonable and
necessary costs of complying with applicable Regulatory
Requirements, (f) ad valorem taxes and (g) sales taxes.
The phrase "Regulatory Requirements" as used in this Exhibit
shall mean (i) taxes, whether or not in existence on the
Execution Date (other than state or federal income taxes, or
those taxes set
EXHIBIT F - Page 4
out above, but including the Texas Gross Receipts Tax, if Walnut
Creek is required to pay this tax) , (ii) fees (other than fees
which can be adjusted pursuant to other sections of this Exhibit
F or fees, the cause of the imposition or change in which are
related to inefficient operations on the part of Walnut Creek)
and (iii) costs, including those occasioned by compliance with
laws passed subsequent to January 1, 1987 or compliance with
interpretations of laws in force on Execution Date, but only if
the interpretations are issued by a court, governmental agency,
or regulatory body, and are different from the interpretations of
the relevant laws as they existed on January 1, 1987 [other than
costs which (a) may be adjusted pursuant to other sections of
this Exhibit F, (b) are brought about by the inefficient
operations of Walnut Creek, (c) are attributable to Walnut
Creek's negligence or intentional misconduct, or (d) are the
result of criminal fines or penalties imposed on Walnut Creek by
any government or governmental agency and relating to the mining,
production, severance, preparation, or sale of Lignite]. The
Base Price includes all Regulatory Requirements as of January 1,
1987. The Base Price will be adjusted as Regulatory Requirements
become effective to reflect the effect of actual changes in
Regulatory Requirements subsequent to January 1, 1987.
Section F.09. General and Administrative Component and Other
Items Component Adjustment. The Base Price shall be adjusted to
allow for changes in the costs of Walnut Creek's allocated
general and administrative services relating to the Lignite, and
other items. The Parties agree that the General and
Administrative Component and the Other Items Component of the
Base Price include charges made from corporate offices of
Phillips and Kiewit Texas Mining Company for overall management
services, including legal, engineering, marketing, accounting,
data processing and general overhead costs.
The adjusted General and Administrative Component and other Items
Component which will become a part of the Adjusted Base Price to
be computed on each Adjustment Date will be equal to P (expressed
in dollars per Dth) in the following formula:
EXHIBIT F - Page 5
P = (0.263) (X)
-------------
(Y)
WHERE:
X = the CPI for All Items - Urban Consumers for the second
month preceding the applicable Adjustment Date, and
Y = The CPI for all Items - Urban Consumers for the month of
December 1994.
Section F.09.1. 1996 Price Component. Effective January 1, 1996,
a new Price Component (the 1996 Price Component) in the amount of
$0.025 per Dth will be included in determining the Base Price for
lignite. The 1996 Price Component will be adjusted on each
subsequent Adjustment Date according to the following formula
where P is the adjusted Price Component expressed in dollars per
Dth.
P = 0.025 (X)
------------
(Y)
WHERE:
X = the Consumer Price Index for All Items - Urban Consumers for
the second month preceding the applicable Adjustment Date and
Y = the Consumer Price Index for All Items - Urban Consumers for
the month of December 1995.
Section F.09.2. 1998 Price Component. Effective January 1, 1998,
a new Price Component (the 1998 Price Component) in the amount of
$0.025 per Dth will be included in determining the Base Price for
lignite. The 1998 Price Component will be adjusted on each
subsequent Adjustment Date according to the following formula
where P is the adjusted Price Component expressed in dollars per
Dth.
P = 0.025 (X)
-----------
(Y)
WHERE:
X = the Consumer Price Index for All Items - Urban Consumers for
the second month preceding the applicable Adjustment Date and
Y = the Consumer Price Index for All Items - Urban Consumers for
the month of December 1997.
Section F.10. Royalties Component. The Lignite will be mined by
Walnut Creek under leases, sub-leases and agreements
(collectively "Leases"). A list of the Leases currently in
effect
EXHIBIT F - Page 6
has been delivered to TNP by Phillips. The Parties acknowledge
that the Leases now in effect require Walnut Creek to pay a
royalty on lignite equal to an average of 6% of the Total Base
Price of the lignite F.O.B. the Point of Delivery. The Base
Price shall be adjusted so that the Royalty Component shall be 6%
of the Adjusted Base Price.
EXHIBIT F - Page 7