EXHIBIT 10.4
NEW RESTATED AND AMENDED
COAL SUPPLY AGREEMENT
dated as of January 1, 2001
between
WYODAK RESOURCES DEVELOPMENT CORP.
and
PACIFICORP
Coal-Fired Steam Electric Generating
Facility at Wyodak, Wyoming
NEW RESTATED AND AMENDED COAL SUPPLY AGREEMENT
NEW RESTATED AND AMENDED COAL SUPPLY AGREEMENT ("Agreement"), dated
as of January 1, 2001 by and among WYODAK RESOURCES DEVELOPMENT CORP., a
Delaware corporation ("Seller") and PACIFICORP, an Oregon corporation
("Buyer").
WHEREAS, Seller mines coal at a coal mine consisting of the existing
Wyodak Mine and the adjacent Clovis Point Mine (the "Mine") in ▇▇▇▇▇▇▇▇
County, Wyoming, pursuant to leases described in Annex A attached hereto (the
"Coal Leases," or the "United States Coal Leases," when referring to items
1,2,3 and 5 of Annex A, or the "State Coal Lease" when referring to item 6 of
Annex A), and owns coal properties in land described in Annex B, and may in
the future add (by lease or purchase) additional coal properties adjacent to
the Mine but part of a logical mining unit with the existing Coal Leases, all
of which Coal Leases and coal properties contain certain coal reserves
(collectively, the "Coal Reserves");
WHEREAS, Buyer owns an 80% interest in, and operates, a coal-fired
steam electric generating facility having a name-plate rating of 335
megawatts (the "Facility") located adjacent to the Coal Reserves;
WHEREAS, the parties intend that Seller will mine and deliver all of
Buyer's coal requirements for the Facility during the Term of this Agreement;
WHEREAS, Seller, Buyer and Black Hills Corporation are parties to a
Further Restated and Amended Coal Supply Agreement dated May 5, 1987, as
amended, which Agreement was substituted, as of the date of its execution,
for the Restated and Amended Coal Supply Agreement dated June 8, 1978 as
amended by the Coal Supply Agreement for Wyodak Unit #2 and the Ancillary
Agreement to Coal Supply Agreement for Wyodak Unit #2, both dated February 3,
1982, all of such agreements being hereinafter collectively referred to as
the "Prior Agreement"; and
WHEREAS, the parties have agreed to settle all disputes relating to
the Prior Agreement pursuant to a Settlement Agreement effective January 1,
2001, and the Parties have agreed to terminate the Prior Agreement, as
between Buyer and Seller, as of the effective date of this Agreement pursuant
to the terms of the Settlement Agreement and enter into this Agreement for
the supply of Buyer's coal requirements for the Facility.
NOW, THEREFORE, Seller agrees to sell and deliver and Buyer agrees
to accept and buy coal, as hereinafter provided, upon the following terms and
conditions:
SECTION 1. TERM OF AGREEMENT.
The term of this Agreement (the "Term") shall commence on January 1,
2001 and shall terminate on December 31, 2022.
SECTION 2. REPRESENTATIONS, ETC. OF SELLER; DEDICATION OF COAL RESERVES;
SECURITY INTEREST AND MORTGAGE; SUBSTITUTION AND RELEASE OF COAL RESERVES,
ETC.
(a) CERTAIN REPRESENTATIONS, WARRANTIES AND COVENANTS OF
SELLER. The source of the coal to be sold and purchased shall be the Coal
Reserves. Seller shall have no right to substitute coal mined from reserves
other than the Coal Reserves. Seller represents and warrants to Buyer that:
(1) The Coal Reserves contained approximately 297,000,000
tons of mineable coal as of January 1, 2001;
(2) Seller has valid and existing leasehold rights under
the Coal Leases;
(3) Seller has title to the Coal Reserves under the real
property described in Annex B, but its right to mine such coal may be subject
to obtaining the consent of the owner of the surface rights to said property;
(4) Seller has certain valid and existing rights (as
described in Annex C hereto) to use the surface of the land under which the
Dedicated Reserves, as hereinafter defined in this Section 2, are located
(such rights to the extent they relate to the Dedicated Reserves being herein
referred to as "Surface Rights"); and
(5) Seller holds the following permits, licenses and
approvals (the "Governmental Approvals") to mine the Dedicated Reserves:
Permit No. 232C-T4 issued by The Department of Environmental
Quality of the State of Wyoming permitting the surface mining
(pursuant to the mine plan filed by Seller with said
Department) of coal in the Dedicated Reserves and other
portions of the Coal Reserves.
Permit No. 581-T3 issued by The Department of Environmental
Quality of the State of Wyoming permitting the surface mining
(pursuant to the mine plan filed by Seller with said
Department) of coal in the Dedicated Reserves and other
portions of the Coal Reserves.
License No. 232-T1-L1 issued by the Department of
Environmental Quality of the State of Wyoming authorizing
Seller to surface mine (pursuant to the mine plan referred to
above) coal in the Dedicated Reserves and other portions of
the Coal Reserve.
Approval by the Geological Survey of the United States
Department of the Interior of the mining plan of Seller to
mine the Dedicated Reserves and other portions of the Coal
Reserves; and
(6) The rights of Seller under the Coal Leases (such rights
to the extent they relate to the Dedicated Reserves being referred to herein
as "Lease Rights"), the Surface Rights and the Governmental Approvals are
sufficient to permit Seller to mine the Dedicated Reserves,
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subject to the claims and rights of others and applicable mining and
reclamation requirements and governmental approvals as are set forth in
Exhibit A to the Security Agreement and Real Estate Mortgage (the "Security
Agreement and Mortgage") being executed and delivered effective with the
execution and delivery of this Agreement.
Seller shall use its best efforts to maintain the Coal Leases, the
Surface Rights and the Governmental Approvals in full force and effect during
the Term, to obtain all necessary renewals thereof, and to obtain all mining
permits and other governmental approvals or authorizations and any consents
from others as may be necessary in order to permit Seller to perform its
obligations hereunder and under the Security Agreement and Mortgage.
(b) DEDICATION OF COAL RESERVES; SECURITY INTEREST AND MORTGAGE;
ACCESS TO DEDICATED RESERVES. Seller does hereby dedicate to the Facility all
coal (constituting at least 40,000,000 tons of mineable coal meeting the
quality requirements set forth in Section 6) from the Coal Reserves under the
following described real property:
TOWNSHIP 50 NORTH, RANGE ▇▇ ▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, WYOMING:
Section 8: The Southwest Quarter; and
Section 17: The Northwest Quarter and the North Half
of the Southwest Quarter.
(The afore-described portion of the Coal Reserves is herein referred
to as the "Dedicated Reserves".)
Seller shall not mine, sell or use coal from the Dedicated Reserves
for any purpose other than fulfilling its obligations under this Agreement,
unless otherwise permitted under this Agreement. Seller shall, effective with
the execution and delivery of this Agreement, execute and deliver the
Security Agreement and Mortgage.
As contemplated by the Access Easement to Dedicated Reserves,
substantially in the form of Annex D hereto, Buyer shall have the right to
enter upon Seller's premises for the purpose of transporting coal from the
Dedicated Reserves to the Facility.
(c) SUBSTITUTION AND RELEASE OF COAL RESERVES, ETC. Other Coal
Reserves and the lease rights and surface rights associated therewith shall
be substituted for the Dedicated Reserves. Coal Reserves shall be released
from the Dedicated Reserves, and Coal Reserves, Lease Rights and Surface
Rights may be released from the lien of the Security Agreement and Mortgage
under certain conditions as follows:
(1) If for any reason any Coal Lease which includes the
right to mine the Dedicated Reserves terminates or expires and is not
renewed, Seller shall dedicate to the Facility other portions of the Coal
Reserves containing coal sufficient to satisfy the quality specifications in
Section 6 and as readily recoverable, both legally and physically, in
substitution for those which have been lost to the extent, if any, that
Seller at the time of the loss has such quality of Coal Reserves which have
not been sold, committed or dedicated to others. Such substituted
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Coal Reserves and the lease rights and surface rights associated therewith
shall be subjected to the lien of the Security Agreement and Mortgage subject
only to the exceptions referred to therein and, to the extent Seller only has
Coal Reserves, lease rights and surface rights subject to liens or security
interests granted to others prior to the date of such substitution, to such
prior liens or security interests, PROVIDED that such substituted Coal
Reserves, lease rights and surface rights shall not be subjected to the lien
of the Security Agreement and Mortgage to the extent such subjection would be
a breach of the terms of any prior lien or security interest and the consent
to such subjection cannot be obtained by Seller from the holder(s) of such
lien or security interest.
(2) Subject to the quality requirements set forth in
Section 6, Seller may from time to time, at its option, supply coal to the
Facility in fulfilling its obligations under this Agreement from the Coal
Reserves but from sources other than the Dedicated Reserves, and in such
event Buyer shall (from time to time upon Seller's written request) release
equivalent quantities of the Dedicated Reserves from the dedication thereof
pursuant to this Agreement and shall release such quantities of the Dedicated
Reserves and the Lease Rights and Surface Rights associated therewith from
the lien of the Security Agreement and Mortgage, but only if after giving
effect to such release the Dedicated Reserves shall contain a quantity of
mineable coal of a quality required by Section 6 in an amount which, when
added to all of the coal sold by Seller to Buyer under this Agreement up to
the date of such release, equals at least 40,000,000 tons.
(3) Seller shall have the option from time to time to cause
Buyer to release quantities of the Dedicated Reserves from the dedication
thereof pursuant to this Agreement and to release such quantities of the
Dedicated Reserves and the Lease Rights and Surface Rights associated
therewith from the lien of the Security Agreement and Mortgage, but only if
after giving effect to such release the Dedicated Reserves shall contain a
quantity of mineable coal of a quality required by Section 6 in an amount
which, when added to all of the coal sold by Seller to Buyer under this
Agreement up to the date of such release, equals at least 40,000,000 tons.
(4) Seller shall further have the option to dedicate other
equivalent reserves from the Coal Reserves in substitution for all or any
part of the Coal Reserves dedicated pursuant to this Agreement and to cause
Buyer to release an equivalent quantity of the Dedicated Reserves (at the
location to be designated by Buyer) from the dedication thereof pursuant to
this Agreement and to release such quantity of Dedicated Reserves and the
Lease Rights and Surface Rights associated therewith from the lien of the
Security Agreement and Mortgage, but only if after giving effect to such
release (i) the Dedicated Reserves shall contain a quantity of mineable coal
of a quality required by Section 6 in an amount which, when added to all of
the coal sold by Seller to Buyer under this Agreement up to the date of such
release, equals at least 40,000,000 tons, (ii) such substituted reserves are
of the same quality and are as readily recoverable, both legally and
physically, as the portion of the Dedicated Reserves to be released, and
(iii) the reserves so substituted and the lease rights and surface rights
associated therewith shall be subjected to the lien of the Security Agreement
and Mortgage, subject only to the exceptions set forth in Exhibit A thereto.
(5) Any part of the Coal Reserves substituted in accordance
with this Section 2(c) shall be coal under surface either owned by Seller or
in which Seller has all necessary surface rights to surface mine such coal.
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(6) The quantities of the Dedicated Reserves to be released
pursuant to clauses (2) and (3) of this Section 2(c) shall be released in the
parcels designated in the Plat of the Dedicated Reserves (the "Plat")
attached as Annex K hereto. Each parcel shall be released in the numerical
order set forth in the Plat upon delivery by Seller from sources other than
the Dedicated Reserves of the amount of coal described in the Plat as being
contained in such parcel and upon fulfillment of the other terms and
conditions applicable to release of quantities of the Dedicated Reserves set
forth in this Section 2(c).
(7) In the event compliance with this Section 2 requires
Seller to subject additional Coal Reserves to the lien of the Security
Agreement and Mortgage, such subjection shall be evidenced by an agreement
supplemental to the Security Agreement and Mortgage, or by such other
agreement as may be necessary, in view of applicable law at the time of such
subjection, to grant Buyer substantially the same rights in such additional
Coal Reserves as Buyer had with respect to the Dedicated Reserves pursuant to
the Security Agreement and Mortgage, subject, however, to the provisions of
clause (1) of this Section 2(c).
(8) At the ▇▇▇▇ ▇▇▇▇▇▇ substitutes other Coal Reserves for
Dedicated Reserves under clause (1) or (4) of this Section 2(c), and in order
for Seller to obtain a release of Coal Reserves from the Dedicated Reserves
under such clause (4), Seller shall (at its expense) deliver to Buyer a
certificate executed by an engineer satisfactory to Buyer certifying that the
Coal Reserves to be substituted contain coal of the quality and quantity, and
are as physically recoverable, as required by such clause (1) or (4) and an
opinion of counsel satisfactory to Buyer to the effect that Seller has all
permits, licenses, consents and approvals from governmental bodies and other
parties legally necessary for Seller to mine the Coal Reserves being
substituted (subject to amending the mine plan of Seller to allow the mining
of the Coal Reserves being substituted at an earlier time than may be
contemplated by Seller's mine plan at the time of the substitution), that
such substituted reserves and the lease rights and surface rights associated
therewith have been duly subjected to the lien of the Security Agreement and
Mortgage to the full extent required hereby, and that all recordations or
filings required to perfect the rights of Buyer under such Security Agreement
and Mortgage, as then supplemented, have been duly made and are in full force
and effect. Such substituted Coal Reserves, lease rights and surface rights
shall thereupon be considered Dedicated Reserves, Lease Rights and Surface
Rights for the purposes of this Agreement and the Security Agreement and
Mortgage and, as such, shall be subject to release or substitution in
accordance with the terms of this Section 2(c). In order to obtain a release
of Coal Reserves from the Dedicated Reserves under clause (2) or (3) of this
Section 2(c), Seller shall (at its expense) deliver to Buyer a certificate
executed by an engineer satisfactory to Buyer certifying that the Dedicated
Reserves which are to remain after such release contain the quantity of coal
required by such clause (2) or (3), as the case may be.
(9) Upon satisfaction of all applicable conditions as set
forth above for the release or substitution of Coal Reserves from the
dedication hereunder and for the release of Coal Reserves, Lease Rights and
Surface Rights from the lien of the Security Agreement and Mortgage, Buyer
shall execute and deliver to Seller appropriate instruments for effecting
such release.
At the time of the completion of Seller's obligations under this
Agreement, Buyer shall release any remaining unmined coal from the dedication
of Coal Reserves pursuant to this
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Agreement and shall release such coal and the lease rights and surface rights
associated therewith from the lien of the Security Agreement and Mortgage.
The lien of the Security Agreement and Mortgage shall not in any way alter
Seller's rights granted in any of the Coal Leases to mine and remove the coal
therefrom, except to the extent Seller's rights may be affected by the
exercise of Buyer's rights in the event of Seller's default pursuant to the
terms of the Security Agreement and Mortgage.
SECTION 3. QUANTITIES OF COAL TO BE SOLD AND PURCHASED; SCHEDULING.
Seller agrees to sell and Buyer agrees to buy all of the coal which
is necessary to fuel Buyer's portion of the Facility during the Term. Buyer
shall notify Seller at least twenty days prior to the beginning of each month
of the quantities of coal to be delivered to Buyer during such month and
shall provide a schedule for delivery. In addition, Buyer will furnish Seller
an estimate of the quantities to be ordered in each of the two months
following such month. Buyer may at any time increase or decrease the amount
of the coal to be delivered at a rate necessary to properly fuel the
Facility, but the amount of coal to be delivered shall not exceed 41,000 tons
for any one week or 1,800,000 tons for any one year.
SECTION 4. BUYER MINIMUM PURCHASE OBLIGATION.
To fuel its 80 percent share of the Facility, Buyer shall purchase
from Seller a minimum of the lesser of (a) 1,500,000 tons of coal during each
calendar year of the Term in which no planned outage is contemplated (as of
April 1 of such year) by Buyer for the Facility, or (b) that number of tons
of coal during each calendar year during the Term in which a planned outage
is contemplated (as of April 1 of such year) by Buyer for the Facility either
(i) for any calendar year ending on or before December 31, 2013, equal to the
greater of 1,280,000 tons or the number determined by multiplying 1,500,000
by a fraction, the numerator of which equals 365 minus the number of days of
the planned outage, and the denominator of which equals 365, or (ii) for any
calendar year commencing on or after January 1, 2014, the number determined
by multiplying 1,500,000 by a fraction, the numerator of which equals 365
minus the number of days of the planned outage, and the denominator of which
equals 365. This minimum amount of coal shall be purchased by Buyer
regardless of the quantity of coal purchased by it during prior years.
Seller's sole remedy for Buyer's failure to purchase this minimum amount of
coal shall be the Short-Fall Payment provided for in Section 15.
SECTION 5. PLACE OF DELIVERY AND SALE.
Delivery shall be made to Buyer at the inlet of the secondary
crusher at the location specified on Annex E. Title to the coal delivered at
the inlet of the secondary crusher by Seller in fulfillment of its
obligations under this Agreement shall thereupon pass to Buyer and Buyer
shall be responsible for transporting said coal from such inlet to the
Facility. Risk of loss for such coal shall pass from Seller to Buyer after
the coal is weighed on the scales referenced in Section 7; provided, however,
in the event scales for the weighing of coal are ever relocated to a point at
or adjacent to the inlet to the secondary crusher, then risk of loss for all
coal weighed on such scales shall pass from Seller to Buyer at the inlet to
the secondary crusher. In the event of emergencies of Buyer preventing the
delivery or acceptance of the coal at the inlet of the
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secondary crusher, the coal shall be delivered at such different location as
may be designated by Buyer, and in that event Seller shall be compensated by
Buyer for any additional cost to Seller resulting from the delivery of said
coal at a different location.
SECTION 6. QUALITY OF COAL.
The coal furnished hereunder shall be raw, run-of-mine coal and
substantially free of magnetic material and other foreign material impurities
including, but not limited to, mining debris, bone, slate, scrapped iron,
steel, petroleum coke, earth, rock, pyrite, wood and blasting wire. Seller
warrants that coal as delivered shall meet the typical and maximum and
minimum specifications (all on a 30-day rolling average basis) as follows:
Coal Size-raw, pit run coal nominally sized to six-inch minus
Coal Quality Typical Minimum Maximum
------------ ------- ------- -------
Btu/lb. 8000 7700
Moisture 30.7% 32.0%
Sulfur 0.55% 0.70%
Ash 6.0% 9.0%
Fusion Temperatures Typical Minimum
------------------- ------- -------
Initial 2050 2000
Softening 2070 2050
Fluid 2150 2100
Notwithstanding the foregoing, if the Facility experiences significant
performance or handling difficulties as a result of coal quality, the parties
shall cooperate in good faith to resolve such difficulties and Seller shall
take all reasonable steps to meet any revised quality parameters agreed upon
at such time as the solution or partial solution to such difficulties.
The quality of the coal delivered shall be determined from the daily
composite coal sample analysis taken by Buyer pursuant to Section 8 hereof.
Seller may deliver and sell coal having a sulfur content in excess of the
sulfur limitation herein during any time that Buyer is able to utilize such
coal in the Facility as then equipped and operating and meet all applicable
federal and state emission standards, PROVIDED that, if such excess sulfur
content increases the costs of Buyer in any way, including but not limited to
increased operating costs and taxes, Seller shall reimburse Buyer for all of
said increased costs.
SECTION 7. WEIGHING.
The weights of the coal delivered to Buyer shall be determined from
weights taken by Buyer on Buyer's scales located at such places as the
parties hereto may agree. The aggregate weights of such delivered coal shall
be accepted as the quantity of coal delivered for which invoices are to be
rendered and payments to be made. Seller shall have the right to have a
representative present at any and all times to observe the weighing of coal
delivered hereunder, and if Seller shall, at any time, question the accuracy
of the weights thus determined, Seller shall
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so advise Buyer and Buyer shall permit Seller's representative to test
Buyer's scales. If any such tests show the scales being used are in error,
such scales shall be adjusted to an accurate condition, PROVIDED that if
Seller and Buyer are unable to agree upon such test and adjustments or the
method thereof, the scales shall be tested and adjusted to a condition of
accuracy within manufacturer's tolerances by a qualified third party,
mutually chosen by Seller and Buyer, and the cost of the testing and
adjusting by such third party shall be shared one-half by Seller and one-half
by Buyer. The sole remedy for inaccurate scales shall be to adjust the scales
to an accurate condition so as to provide proper measurement of quantities of
coal delivered thereafter.
SECTION 8. SAMPLING AND ANALYSIS.
Analysis of calorific value, ash, sulfur, moisture and, if requested
by Buyer, ash softening temperature, shall be made by Seller or at its
direction for each day's deliveries of coal. Analysis shall be performed in
accordance with the latest methods approved by the American Society for
Testing and Materials (ASTM) or such other methods as the parties may agree
upon. Samples shall be taken by Buyer on a regular basis in accordance with
ASTM standards utilizing the automated sampler located in the secondary
crusher at the point of delivery. Other sampling methods and locations may be
used from time to time upon mutual agreement of the parties. All samples
shall be divided into three parts and put in suitable airtight containers.
One part shall be taken and analyzed by Seller, one part shall be retained by
Buyer and may be analyzed by Buyer at its discretion and the third part shall
be retained by Seller for not less than one month in one of the aforesaid
containers properly sealed and labeled to be analyzed if a dispute arises due
to any differences between Seller's analysis and Buyer's analysis. The
results of Seller's analysis for each day's deliveries of coal during a
calendar month shall be communicated to Buyer as soon as practicable after
the end of such calendar month so that Buyer can perform the calculations
described in Section 9. Seller shall pay for the cost of the analysis of the
samples to be analyzed by it. Buyer shall bear the cost of any analysis it
should decide to make of the samples it retains. The analysis of the third
part of each sample, should its analysis be found necessary, shall be made by
an independent commercial testing laboratory mutually chosen, and the results
of such commercial laboratory analysis shall be made available and accepted
by all parties hereto as the quality of the coal represented by such sample.
The costs thereof shall be shared one-half by Seller and one-half by Buyer.
SECTION 9. DETERMINING OF WEIGHTED AVERAGE HEAT CONTENT.
As soon as practicable after the end of each month, the weighted
average heat content, in B.T.U.'s per pound, of coal delivered hereunder
during such month shall be computed by Buyer from the daily coal delivered
weight readings from the coal scales and from the analysis made by Seller
from the daily composite coal samples taken by Seller pursuant to Section 8.
Computations made by Buyer shall be communicated to Seller.
SECTION 10. PURCHASE PRICE.
(a) The Purchase Price per ton of coal to be paid by Buyer to Seller
for each ton of coal delivered under this Agreement from January 1, 2001
through June 30, 2014, shall be the sum of (i) in the case of the first
1,160,000 tons of coal sold hereunder , $8.527, and in the case of all coal
sold hereunder other than the first 1,160,000 tons, $6.207 (said $8.527 being
the "Base
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Price" for the first 1,160,000 tons of coal sold hereunder for purposes of
the Btu adjustment in Section 13, and said $6.207 being the "Base Price" for
all purposes after the first 1,160,000 tons of coal have been sold
hereunder), plus or minus (ii) in the case of all coal sold hereunder other
than the first 1,160,000 tons, the adjustments provided in Section 11
applicable to such delivery, plus (iii) the Government Impositions determined
in accordance with Section 12 applicable to such delivery. The Base Price is
based on coal having a BTU content of 8,000 BTU per pound and shall be
further subject to adjustment for BTU variations as provided in Section 13.
Annex F attached hereto is a sample computation of the Purchase Price based
upon assumed facts to illustrate the application of Sections 10, 11, 12 and
13.
(b) The Purchase Price per ton of coal to be paid by Buyer to Seller
for each ton of coal delivered under this Agreement from July 1, 2014 through
June 30, 2019, shall be determined by the parties as follows:
(i) The Purchase Price for each ton of coal delivered under
this Agreement in July 2014 shall equal the product of (A) the sum of (1) the
8400 BTU PRB Market Price (as hereinafter defined), (2) the Transportation
Market Price (as hereinafter defined) and (3) the Levelized Fixed Charge (as
hereinafter defined), and (B) a fraction, the numerator of which is 8,000 and
the denominator of which is 8,400. The Purchase Price so determined is based
on coal having a BTU content of 8,000 BTU per pound and shall be further
subject to adjustment for BTU variations as provided in Section 13.
(ii) The 8400 BTU PRB Market Price shall equal the average
spot coal price (FOB loaded into railcars at the mine) for 8400 BTU per pound
coal sold from mines located in the Powder River Basin in Wyoming during the
12 months ending March 31, 2014, as reported in COAL DAILY. If COAL DAILY has
ceased publication or ceases to publish spot market price data on a monthly
or more frequent basis, the parties shall substitute such publication as may
exist in March 2014 that most accurately reports the spot market price for
such coal. If no such publication exists, the parties shall negotiate in good
faith to determine such average market price, and if such negotiation does
not produce agreement on such average market price by June 1, 2014, either
Seller or Buyer may on or before July 1, 2014, invoke the arbitration
procedure described in Section 24 below to determine the average spot market
coal price (FOB loaded into railcars at the mine) for 8400 BTU per pound coal
sold from mines located in the Powder River Basin in Wyoming during the 12
months ending March 31, 2014. Notwithstanding the foregoing, if COAL DAILY
(or another comparable publication similar in standing in the coal industry)
publishes a market price index for 8400 BTU Wyoming PRB coal sold on a 1-year
or longer contract basis (FOB loaded into railcars at the mine) for contracts
incepted during the 24 months ending March 31, 2014, and having
escalation/de-escalation provisions reasonably comparable to those contained
in Section 11 and other terms and conditions reasonably comparable to those
set forth in this Agreement, the 8400 BTU PRB Market Price shall equal the
average contract price for such 8400 BTU coal as set forth in such index
during the 24-month period ended March 31, 2014.
(iii) The Transportation Market Price shall equal the
average per ton market price for the transportation of coal at the rate of
approximately 36,000 tons per week by rail commencing on July 1, 2014, in
railroad supplied railcars from the two Powder River Basin
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mines (other than the Coal Reserves) in closest proximity to the Facility
that then produce coal having a quality reasonably comparable to the quality
of coal produced by the mines in the Powder River Basin that produce the coal
the market price of which is reflected in the index used in clause (ii). The
parties shall designate a mutually acceptable engineering firm on or before
April 1, 2014 to perform the analysis and determination of the Transportation
Market Price. If the parties are unable to agree on the engineering firm by
April 1, 2014, or if any party disagrees with the determination made by the
engineering firm within 30 days after the final determination by such firm of
the Transportation Market Price, then either party may on or before October
1, 2014, invoke the arbitration procedure described in Section 24 below to
determine the Transportation Market Price.
(iv) The Levelized Fixed Charge shall equal the
hypothetical per ton fully-loaded and levelized pre-income tax cost that
Buyer would incur if it constructed a permanent rail unloading facility at
the Facility and operated it for a period of 20 years commencing July 1,
2014, for the receipt of coal deliveries via rail at the rate of
approximately 36,000 tons per week. To determine the Levelized Fixed Charge,
the parties shall designate a mutually acceptable engineering firm on or
before April 1, 2014 to perform an evaluation of the capital costs required
to construct the unloading facility, including an unloading ▇▇▇▇▇▇ capable of
unloading a unit train within 6 hours, a reasonable and prudent track
configuration, necessary track siding/switching devices to connect with the
mainline of the railroad entity then most proximate to and economically
capable of serving the Facility, construction of any required roads and
underpasses, requisite supporting structures, acquisition of required
rights-of-way at then fair market value, and environmental and engineering
costs associated with the design and construction of the unloading facility.
Buyer shall have the right, but not the obligation, prior to April 1, 2014,
to seek bids from not less than two reputable contractors for either the
design and/or the construction of the unloading facility, to assist in
establishing the cost of the design and/or construction of such facility, the
lower of which bids shall be deemed conclusive evidence of such cost if the
bids are within 10% of each other. The engineering firm shall also estimate
the levelized cost to operate the unloading facility (including but not
limited to all costs for property taxes, insurance, maintenance, labor,
materials, supplies and power associated with the unloading facility) in a
reasonable and prudent manner at a rate of approximately 36,000 tons per week
over the 20-year expected life of the facility using an assumed inflation
rate equal to the average of the annual change (on a calendar year basis) in
the index referenced in Section 11(c) for the three consecutive calendar
years ending December 31, 2013. In determining return and interest expense
associated with the capital cost of the unloading facility, the engineering
firm shall assume that the capital (net of the residual value, after
reclamation, of the unloading facility at the end of the 20-year life) is
fully-amortized on a straight line basis over 20 years and financed, 50% with
equity and 50% with debt, with the debt amortizing on a levelized basis over
20 years. The return on equity shall be assumed to be the average return on
equity then allowed in all jurisdictions within the United States regulating
the electricity distribution assets of Buyer, and the cost of debt shall be
assumed to be the average per annum interest rate on Buyer's long-term
mortgage bond indebtedness with respect to the funding of electricity
distribution assets of Buyer. If Buyer does not own electricity distribution
assets on April 1, 2014, but a United States based affiliate of Buyer owns
such assets on April 1, 2014, then the return on equity and cost of
indebtedness shall be determined by reference to the average return on equity
allowed in all jurisdictions within the United States regulating the
electricity distribution assets of the affiliate
10
of Buyer and the per annum interest rate on such entity's long-term mortgage
bond indebtedness. If Buyer (or an affiliate of Buyer) does not own and
operate electricity distribution assets regulated by a public utility
commission on April 1, 2014, then the return on equity and cost of
indebtedness shall be determined by reference to the average return on equity
allowed in all jurisdictions regulating the electricity distribution assets
of Black Hills Power, Inc. ("Black Hills") and the average per annum interest
rate on Black Hills' long-term mortgage bond indebtedness with respect to
Black Hills' electricity distribution assets. If neither Buyer nor Black
Hills nor any affiliate of either owns electricity distribution assets on
April 1, 2014, then the parties shall mutually agree upon the average return
on equity allowed in all jurisdictions for a western United States
electricity distribution company, and on the average per annum interest rate
on such company's long-term mortgage indebtedness with respect to its
electricity distribution assets. The calculation of return on equity shall
gross up the aforesaid average return on equity based on then applicable
federal and state income tax rates. The engineering firm computing the
Levelized Fixed Charge shall assume that the amortization of the capital, the
interest expense, the return and the operating costs as calculated on a
levelized basis for each of the 20 years of the assumed life of the facility
is to be allocated on a per ton basis based on the assumption of a number of
tons per year determined by taking the average of PacifiCorp's annual tonnage
purchases hereunder for calendar years 2009 through 2013, normalized to
exclude all periods of uncontrollable force (as set forth in Section 22), if
any, during such five-year period, and multiplying such average by a
fraction, the numerator of which is the weighted average calorific value
(expressed as BTU/lb.) of the coal purchased by PacifiCorp hereunder during
such five-year period, and the denominator of which is 8400. For example, if
the foregoing computation results in 1,600,000 tons as PacifiCorp's annual
average purchases for the five-year period, adjusted to 8400 BTU/lb., and if
the engineering firm determines a levelized amortization of capital with
interest expense and return of $1,000,000 per year and a levelized operating
cost for the facility of $40,000 per year, then the total levelized annual
cost of $1,040,000 will be converted to a per ton Levelized Fixed Charge of
$0.65 per ton ($1,040,000 divided by 1,600,000 tons). If the parties are
unable to agree on the engineering firm by April 1, 2014, or if any party
disagrees with the determination made by the engineering firm within 30 days
after the final determination by such firm of the Levelized Fixed Charge,
then either party may on or before October 1, 2014, invoke the arbitration
procedure described in Section 24 below to determine the Levelized Fixed
Charge.
(v) The parties shall use their respective best efforts to
cause the engineering firm or firms used to determine the new purchase price
to complete its/their work product and render a final opinion on or before
July 1, 2014. Seller and Buyer shall each bear one-half of the fees and costs
for the engineering firm(s). If the purchase price has not been agreed upon
by July 1, 2014, the parties shall continue to use the per ton Purchase Price
from coal delivered during June 2014 until the new purchase price is finally
determined, at which point Seller shall issue an invoice or credit truing up
the difference between the invoiced price and the ultimately agreed upon or
determined new purchase price.
(vi) Once the new purchase price per ton for coal delivered
during July 2014 has been finally determined in accordance with this
subsection (b), the parties shall also promptly agree on the portion of such
new purchase price that constitutes Government Impositions and on the
allocation of the remaining portion of the new purchase price (the
11
"Netback Portion" which shall also be the new Base Price effective July 1,
2014) amongst the several components described in Section 11. Section 11
below shall also be deemed amended to bring forward to dates in 2014
reasonably comparable to the dates in 2000 the base values of the respective
indices from which future escalation/de-escalation shall be measured, and to
make Section 11 as so revised applicable to adjustments to the Netback
Portion from July 1, 2014 through December 31, 2022 (subject to further
revision as set forth in subsection (c) (vi) below). If the parties are
unable to agree on the portion of the new purchase price that constitutes
Government Impositions or on the allocations or base values for
escalating/de-escalating the Netback Portion, then either party may at any
time after October 1, 2014 invoke the arbitration procedure described in
Section 24 below to determine the portion of the new purchase price that
constitutes Government Impositions or the allocations or base values for
escalating/de-escalating the Netback Portion.
(vii) The Purchase Price for coal delivered after July 2014
and prior to July 1, 2019 shall be the sum of (i) the Netback Portion, plus
or minus (ii) the adjustments provided in the revised Section 11 applicable
to such delivery, plus (iii) the Government Impositions determined in
accordance with Section 12 applicable to such delivery. The Purchase Price so
determined is based on coal having a BTU content of 8,000 BTU per pound and
shall be further subject to adjustment for BTU variations as provided in
Section 13.
(c) Either Seller or Buyer shall have the right, exercisable by
written notice delivered to the parties on or before January 1, 2019, to
renegotiate the Purchase Price effective July 1, 2019. If neither Seller nor
Buyer exercises this right, then the Purchase Price shall be as specified for
June 2019 without regard to this subsection (c) and with continued
escalation/de-escalation pursuant to Section 11 (as amended in 2014 pursuant
to subsection (b) above) and continued adjustments pursuant to Sections 12
and 13. If either Seller or Buyer exercises this right, then the Purchase
Price per ton of coal to be paid by Buyer to Seller for each ton of coal
delivered under this Agreement from July 1, 2019 through December 31, 2022,
shall be determined by the parties as follows:
(i) The Purchase Price for each ton of coal delivered under
this Agreement in July 2019 shall equal the product of (A) the sum of (1) the
8400 BTU PRB 2019 Market Price (as hereinafter defined), (2) the
Transportation 2019 Market Price (as hereinafter defined) and (3) the
Levelized Fixed Charge (as defined above), and (B) a fraction, the numerator
of which is 8,000 and the denominator of which is 8,400. The Purchase Price
so determined is based on coal having a BTU content of 8,000 BTU per pound
and shall be further subject to adjustment for BTU variations as provided in
Section 13.
(ii) The 8400 BTU PRB 2019 Market Price shall equal the
average spot coal price (FOB loaded into railcars at the mine) for 8400 BTU
per pound coal sold from mines located in the Powder River Basin in Wyoming
during the 12 months ending March 31, 2019, as reported in COAL DAILY. If
COAL DAILY has ceased publication or ceases to publish spot market price data
on a monthly or more frequent basis, the parties shall substitute such
publication as may exist in March 2019 that most accurately reports the spot
market price for such coal. If no such publication exists, the parties shall
negotiate in good faith to determine such average market price, and if such
negotiation does not produce agreement on such average market price by June
12
1, 2019, either Seller or Buyer may on or before July 1, 2019, invoke the
arbitration procedure described in Section 24 below to determine the average
spot market coal price (FOB loaded into railcars at the mine) for 8400 BTU
per pound coal sold from mines located in the Powder River Basin in Wyoming
during the 12 months ending March 31, 2019. Notwithstanding the foregoing, if
COAL DAILY (or another comparable publication similar in standing in the coal
industry) publishes a market price index for 8400 BTU Wyoming PRB coal sold
on a 1-year or longer contract basis (FOB loaded into railcars at the mine)
for contracts incepted during the 24 months ending March 31, 2019, and having
escalation/de-escalation provisions reasonably comparable to those contained
in Section 11 and other terms and conditions reasonably comparable to those
set forth in this Agreement, the 8400 BTU PRB Market Price shall equal the
average contract price for such 8400 BTU coal as set forth in such index
during the 24-month period ended March 31, 2019.
(iii) The Transportation 2019 Market Price shall equal the
average per ton market price for the transportation of coal at the rate of
approximately 36,000 tons per week by rail commencing on July 1, 2019, in
railroad supplied railcars from the two Powder River Basin mines (other than
the Coal Reserves) in closest proximity to the Facility that then produce
coal having a quality reasonably comparable to the quality of coal produced
by the mines in the Powder River Basin that produce the coal the market price
of which is reflected in the index used in clause (ii). The parties shall
designate a mutually acceptable engineering firm on or before April 1, 2019
to perform the analysis and determination of the Transportation Market Price.
If the parties are unable to agree on the engineering firm by April 1, 2019,
or if any party disagrees with the determination made by the engineering firm
within 30 days after the final determination by such firm of the
Transportation Market Price, then either party may on or before October 1,
2019, invoke the arbitration procedure described in Section 24 below to
determine the Transportation 2019 Market Price.
(iv) The Levelized Fixed Charge shall be the same as the
Levelized Fixed Charge determined in accordance with subsection (b)(iv)
above, subject to the following adjustment. In the event of a change in law
or regulation or interpretation of law or regulation after July 1, 2014 and
before June 30, 2019, and the effect of that change is to increase or
decrease the capital cost of the rail unloading facility or the annual
operating cost of the facility above or below the levels specified in
subsection (b)(iv) by more than 10% on a levelized basis, then the Levelized
Fixed Charge shall be adjusted to reflect such increase or decrease, computed
on the same basis as set forth in subsection (b)(iv) with a change in the
assumed inflation rate to equal the average of the annual change (on a
calendar year basis) in the index referenced in Section 11(c) for the three
consecutive calendar years beginning January 1, 2016 and ending December 31,
2018. If the parties are unable to agree on whether a change in law or
regulation or interpretation of law or regulation has occurred or on the
adjustment to the Levelized Fixed Charge resulting therefrom, then either
party may on or before October 1, 2019, invoke the arbitration procedure
described in Section 24 below to determine the adjustment, if any, to the
Levelized Fixed Charge.
(v) The parties shall use their respective best efforts to
cause the engineering firm or firms used to determine the new purchase price
to complete its/their work product and render a final opinion on or before
July 1, 2019. Seller and Buyer shall each bear one-half of the
13
fees and costs for the engineering firm(s). If the purchase price has not
been agreed upon by July 1, 2019, the parties shall continue to use the per
ton Purchase Price from coal delivered during June 2019 until the new
purchase price is finally determined, at which point Seller shall issue an
invoice or credit truing up the difference between the invoiced price and the
ultimately agreed upon or determined new purchase price.
(vi) Once the new purchase price per ton for coal delivered
during July 2019 has been finally determined in accordance with this
subsection (c), the parties shall also promptly agree on the portion of such
new purchase price that constitutes Government Impositions and on the
allocation of the remaining portion of the new purchase price (the "2019
Netback Portion" which 2019 Netback Portion shall also be the new Base Price
effective July 1, 2019) amongst the several components described in Section
11. Section 11 below shall also be deemed amended to bring forward to dates
in 2019 reasonably comparable to the dates in 2000 the base values of the
respective indices from which future escalation/de-escalation shall be
measured, and to make Section 11 as so revised applicable to adjustments to
the 2019 Netback Portion from July 1, 2019 through December 31, 2022. If the
parties are unable to agree on the portion of the new purchase price that
constitutes Government Impositions or on the allocations or base values for
escalating/de-escalating the 2019 Netback Portion, then either party may at
any time after October 1, 2019 invoke the arbitration procedure described in
Section 24 below to determine the portion of the new purchase price that
constitutes Government Impositions or the allocations or base values for
escalating/de-escalating the 2019 Netback Portion.
(vii) The Purchase Price for coal delivered hereunder after
July 2019 shall be the sum of (i) the 2019 Netback Portion, plus or minus
(ii) the adjustments provided in the revised Section 11 applicable to such
delivery, plus (iii) the Government Impositions determined in accordance with
Section 12 applicable to such delivery. The Purchase Price so determined is
based on coal having a BTU content of 8,000 BTU per pound and shall be
further subject to adjustment for BTU variations as provided in Section 13.
SECTION 11. PRICE ADJUSTMENTS.
Following the first full month occurring after the initial 1,160,000
tons of coal have been delivered hereunder, the Base Price shall be subject
to adjustment each calendar month through June 30, 2014 (and thereafter
through December 31, 2022, as provided in Subsections 10 (b) (vi) and 10 (c)
(vi) above), based on the following:
(a) LABOR INDEX COMPONENT. The Base Price shall be adjusted monthly
on the first day of each calendar month to cover changes in labor costs by an
amount determined by multiplying 140.0 cents per ton by the percentage change
in the Average Hourly Earnings Index EEU10122006 published by the United
States Bureau of Labor Statistics from the Base Value of such index (the term
"Base Value" being defined in Subsection (d) (i) of this Section 11).
(b) MATERIALS AND SUPPLIES. The Base Price shall be adjusted monthly
on the first day of each calendar month to cover changes in the costs of
materials and supplies:
14
(i) TIRES. The Base Price shall be adjusted by an amount
determined by multiplying 8.0 cents per ton by the
percentage change in the Producer Price Index, Rubber
and Rubber Products, BLS WPU071, published by the
United States Bureau of Labor Statistics from the
Base Value of such index.
(ii) FUEL. The Base Price shall be adjusted by an amount
determined by multiplying 25.0 cents per ton by the
percentage change in the Producer Price Index, Fuel
#2 Diesel, Direct Sales to End Users, BLS
PCU2911#4132, published by the United States Bureau
of Labor Statistics from the Base Value of such
index.
(iii) CAPITAL. The Base Price shall be adjusted by an
amount determined by multiplying 80.0 cents per ton
by the percentage change in the Producer Price Index,
Construction Machinery and Equipment, BLS WPU112,
published by the United States Bureau of Labor
Statistics from the Base Value of such index.
(iv) EXPLOSIVES. The Base Price shall be adjusted by an
amount determined by multiplying 17.0 cents per ton by
the percentage change in the Producer Price Index,
Chemicals and Allied Products, BLS WPU067, published by
the United States Bureau of Labor Statistics from the
Base Value of such index.
(v) POWER. The Base Price shall be adjusted by an amount
determined by multiplying 28.0 cents per ton by the
percentage change in the Producer Price Index, Power-Mtn
Region, BLS PCU4981#13831, published by the United
States Bureau of Labor Statistics for the month then
ended from the Base Value of such index.
(vi) MATERIALS AND SUPPLIES-MISC. The Base Price shall be
adjusted by an amount determined by multiplying 47.0
cents per ton by the percentage change in the Producer
Price Index, Mining Machinery Parts, BLS WPU11925301,
published by the United States Bureau of Labor
Statistics from the Base Value of such index.
(c) UNDIFFERENTIATED CAPITAL, RETURN AND PROFIT. The Base Price
shall be adjusted quarterly on the first day of each calendar quarter to
cover the effects of inflation/deflation on Seller's capital costs, return
and profit by an amount determined by multiplying 275.7 cents per ton by the
percentage change in the Gross Domestic Product Implicit Price Deflator
published by the United States Department of Commerce, Bureau of Economic
Analysis from the Base Value of such index.
(d) INDEX ADJUSTMENTS. The following procedures shall be used to
calculate adjustments to the Base Price based on changes in published indices:
15
(i) Base values ("Base Values") used for determining
adjustments to the Base Price in any month shall, in the case of indices
published monthly, be the published value for the month that is two months in
advance of the first month that the Base Price was subject to adjustment and
in the case of indices published quarterly, the index value for the quarter
that is two quarters in advance of the first month that the Base Price was
subject to adjustment. Index values which are compared to Base Values used
for determining adjustments to the Base Price in any month shall, in the case
of indices published monthly, be the latest published values for the second
preceding month, and in the case of indices published quarterly, be the
latest published values for the second preceding quarter (ie., the December
2001 index value is to be used for the February 2002 adjustment for monthly
indices, and the December 31, 2001 index value is to be used for the April
2002 adjustment for quarterly indices).
(ii) If any of the foregoing indices or any revision or
equivalent ceases to be published by any federal agency, such indices shall
be replaced by a substantially equivalent index that, after necessary
adjustment, if any, provides the most reasonable substitute for such index
and which is mutually agreeable to the parties.
(iii) All calculations of individual adjustments to the
Base Price shall be rounded to the nearest mill or, if there is no nearest
mill, to the nearest cent.
SECTION 12. GOVERNMENT IMPOSITIONS.
The Purchase Price for the first 1,160,000 tons of coal sold
hereunder includes an estimated $3.973 representing the following
governmental taxes, fees, royalties, costs and impositions (collectively,
"Government Impositions"):
GOVERNMENT IMPOSITION EST. COST PER TON ON 1/1/01
Property Tax $0.063
Black Lung Tax $0.527
Reclamation Fee $0.350
Royalties $1.618
Severance Tax $0.762
Extraction Tax $0.653
The Purchase Price for all coal sold hereunder after the first
1,160,000 tons of coal have been sold hereunder, includes an estimated $3.063
representing the following governmental taxes, fees, royalties, costs and
impositions (collectively, "Government Impositions"):
GOVERNMENT IMPOSITION EST. COST PER TON ON OR ABOUT 9/1/01
Property Tax $0.063
Black Lung Tax $0.391
Reclamation Fee $0.350
Royalties $1.215
Severance Tax $0.564
Extraction Tax $0.483
16
(a) ITEMS SUBJECT TO REIMBURSEMENT AS GOVERNMENT IMPOSITIONS. Buyer
shall reimburse Seller, as provided in this Section 12, for only the
following Government Impositions:
(i) TAXES. Buyer shall reimburse Seller only for those
federal, state and local taxes paid by Seller which are imposed directly on,
or measured by (or in the case of property tax or future taxes similarly
levied, are properly allocated to) the coal being sold and delivered to Buyer
pursuant to this Agreement, or upon the mining, ownership, possession, sale
and delivery of such coal to the Buyer. These taxes may include, but are not
limited to, property taxes, taxes on coal production, extraction and
severance, (including without limitation any severance or extraction tax
measured in whole or in part by the value of coal sold to Buyer plus any
value added as mandated by law), ad valorem taxes whether on coal mined or in
place, personal property taxes, black lung taxes, sales taxes, transfer
taxes, excise taxes and occupation taxes. Property Taxes payable by Seller
shall be allocated on a per ton basis pro rata to all tons of coal sold by
Seller from the Coal Reserves during the period covered by the tax charge.
Buyer shall not be responsible for any other taxes paid by or imposed upon
Seller, including, but not limited to, those taxes levied or measured by, in
whole or in part, net income, capital or retained earnings, and any business
privilege, business activity, general franchise or other similar taxes
imposed on Seller's general business activity in the jurisdiction that seeks
to impose the tax. For purposes of determining Taxes in which a
transportation or other deduction is allowed or certain mining costs are
excluded, the Taxes shall be computed each period based on the specific
deduction or exclusion for all tons delivered by Seller to Buyer pursuant to
this Agreement from the Coal Reserves during that period.
(ii) FEDERAL RECLAMATION FEE. Buyer shall reimburse Seller
for the Abandoned Mine Reclamation Fee actually attributable to tons of coal
sold to Buyer pursuant to this Agreement. The Abandoned Mine Reclamation Fee
is assessed by the United States as $0.35 per ton as of January 1, 2001, less
an allowed moisture credit. If the fee is ever levied on or measured by, in
whole or in part, the purchase price of coal delivered hereunder, then Buyer
shall pay Seller an amount that is equal to the applicable statutory rate of
such fee multiplied by the value or the purchase price, as applicable, of the
coal actually sold hereunder during the subject period, after taking into
account all applicable exclusions, deductions, credits or other reductions
authorized by law. No adjustment to the Base Price shall be made to recover
final reclamation costs except for changes in such costs resulting from
changes in law after January 1, 2001 which are to be reimbursed pursuant to
subsection (iv) below.
(iii) ROYALTIES. Buyer shall reimburse Seller for the per
ton royalties actually incurred by Seller on the portion of the Coal Reserves
consisting of United States Leases and directly attributable to the sale by
Seller of coal to Buyer under this Agreement. The royalty rate as of January
1, 2001 is 12.5% of the Purchase Price, plus any additional value added as
mandated by law, minus any allowable deductions. In addition, if Seller mines
coal from the State Lease for sale to Buyer hereunder, Buyer shall reimburse
Seller for royalties on the portion of the Coal Reserves consisting of the
State Lease as though the royalty on the State Lease was equal to the then
average royalty rate on United States Leases. In no event shall Seller seek
reimbursement from Buyer for any overriding royalty, rental, bonus payment or
other
17
comparable payment paid to any third party for the right to mine coal from,
or arising as a result of mining coal from, any of the Coal Reserves.
(iv) OTHER GOVERNMENT IMPOSITIONS. Whenever any federal,
state or local laws, rules, regulations or requirements, whether due to
change in, additions to or difference of interpretation or enforcement by any
governmental authority of existing laws, rules, regulations or requirements
after January 1, 2001 (a "New Government Imposition"), should cause an
increase or decrease in the cost to Seller of mining coal in compliance with
such laws, rules, regulations or requirements, Buyer shall reimburse Seller
(in the case of an increase) or Seller shall issue a credit to Buyer (in the
case of a decrease) for the actual additional cost (or savings) per ton of
coal to Seller on account thereof. With respect to a New Government
Imposition effective prior to January 1, 2014, payment for these additional
costs shall be made on an accrual basis so that payment is made at the ▇▇▇▇
▇▇▇▇▇▇ incurs the obligation even though Seller may not fulfill the
obligation until some time later. With respect to a New Government Imposition
effective after December 31, 2013, any such adjustment shall be effective
from the date Seller is required to accrue the additional cost under GAAP. In
no event shall this subsection (iv) be applied in such a fashion as to result
in double recovery by Seller of any such costs. Seller shall use its best
efforts to minimize or eliminate any cost that would otherwise be recoverable
under this subsection (iv). To the extent a prudent miner operating the Mine
in a competitive market would comply with the New Government Imposition by
using its own labor and equipment, Seller shall utilize its labor and
equipment to fulfill the New Government Imposition mandate and Buyer shall
reimburse Seller for Buyer's pro rata portion of the actual cost of such
labor and equipment (net of any cost savings or benefit received by Seller as
a result of complying with such New Government Imposition mandate). To the
extent a prudent miner operating the Mine in a competitive market would
modify its mine plan to reduce the cost of complying with the New Government
Imposition mandate, Seller shall take all reasonable steps to minimize costs
by so modifying the mine plan for the Mine.
The parties agree that Buyer shall reimburse Seller for all costs, expense
and reasonable attorneys fees relating to legal or regulatory proceedings
based upon the first audit, with respect to coal delivered hereunder, by any
responsible agency after January 1, 2001, of each of the Government
Impositions set forth in the beginning of SECTION 12. Buyer shall be notified
of all hearings or other proceedings, including settlement negotiations and
at its own expense, shall be entitled to have its legal representative
present at all proceedings in a non-participating role. Seller shall consult,
however, with legal representatives of Buyer. Buyer's privilege to attend
regulatory proceedings shall not authorize Buyer to receive, or gain access
to, Seller's privileged attorney-client communications or attorney work
product. In the event Seller deems any business information confidential and
proprietary and the disclosure thereof to Buyer a potential harm to Seller,
Buyer shall upon request from Seller and as a condition to receipt of such
information, execute a commercially reasonable form of confidentiality
agreement covering such information, and limiting the use of such information
to the applicable proceeding, and dissemination within Buyer to those
employees of Buyer with a need to know and those consultant's, attorneys or
accountants of Buyer who are assisting Buyer in such proceedings. Buyer
agrees that at the close of such proceedings, all confidential and
proprietary information, including all copies thereof, shall be returned to
Seller.
18
(b) PARTIES' INTENT; LIMITATION. It is the parties' intent that the
Buyer reimburse Seller for all of the Government Impositions actually
attributable to coal sold to Buyer under this Agreement, and in an amount
that reflects no duplication and is not greater than the amount actually paid
by Seller to the governmental authorities or incurred by Seller (as a proper
accrual in accordance with prudent mining practices) as a result thereof. It
is also the parties' intent that, with respect to Government Impositions that
are levied on or measured by the purchase price of coal, Buyer shall
reimburse Seller for the actual amount of Government Imposition attributable
to coal sold to Buyer under this Agreement without regard to revenues
received by Seller from sales to other customers of coal mined from the Coal
Reserves.
(c) ESTIMATES AND TRUE-UPS OF GOVERNMENT IMPOSITIONS. The parties
recognize that at the time each monthly invoice for coal is prepared, it may
not be possible for Seller to calculate definitively the Government
Impositions actually attributable to coal sold during such calendar month.
Each monthly invoice will, therefore, be based on the most current data
reasonably available to Seller at the time of invoicing. Within a reasonable
time after receipt of information permitting determination of actual
Government Impositions attributable to coal sold to Buyer in any such
calendar month, Seller shall prepare and furnish to Buyer a hard copy of a
supplemental invoice sent by overnight delivery reflecting a true-up of the
actual against the estimate used in preparing the original invoice.
SECTION 13. PRICE ADJUSTMENTS-CALORIFIC QUALITY.
For coal delivered in each month hereunder, the Base Price, adjusted
pursuant to the application of Sections 10 and 11 shall be further adjusted
monthly for calorific quality by multiplying the Base Price by a fraction,
the numerator of which is the actual weighted average BTU per pound of coal
delivered (as determined in Section 9) for the period for which the
calculation is being made, and the denominator of which is 8000.
SECTION 14. SPECIAL ONE-TIME PAYMENT.
On or before September 1, 2001, Buyer shall pay Seller a one-time
payment of $7,374,000. Seller shall be responsible for any Government
Impositions measured by or levied with respect to such one-time payment by
Buyer. This provision shall in no event be deemed to affect either party's
right to make any claim with respect to the Prior Agreements if such claim is
allowable under the terms of the Settlement Agreement.
SECTION 15. SHORTFALL PAYMENT.
(a) For any year during the Term in which no planned outage is
contemplated (as of April 1 of such year) by Buyer for the Facility, Buyer
shall pay a Short-Fall Payment if it purchases fewer than 1,500,000 tons of
coal for its own account. For any year during the Term in which a planned
outage is contemplated (as of April 1 of such year) by the Buyer for the
Facility, Buyer shall pay a Short-Fall Payment if it purchases fewer tons
than either (i) for any calendar year ending on or before December 31, 2013,
the greater of 1,280,000 tons, or the amount determined by multiplying
1,500,000 by a fraction, the numerator of which equals 365 minus the number
of days of the planned outage, and the denominator of which equals 365, or
19
(ii) for any calendar year commencing on or after January 1, 2014, the amount
determined by multiplying 1,500,000 by a fraction, the numerator of which
equals 365 minus the number of days of the planned outage, and the
denominator of which equals 365.
This Short-Fall Payment shall be equal to the result of the
following equation:
(MT - P) (B - C)
Where:
MT = 1,500,000 tons if there is no planned
outage, or the lesser tonnage specified
above if there is a planned outage
contemplated by Buyer for the Facility as of
April 1 of the year in question;
P = number of tons purchased by Buyer during the year;
B = the Purchase Price as of the date of payment of the
Short-Fall Payment; and
C = per ton costs for Government Impositions
as of the payment of the Short-Fall Payment
that Seller need not pay until coal is
mined.
(b) Buyer shall be excused from paying the Short-Fall Payment for
any calendar year if failure to purchase the minimum tons of coal for its
account was caused by a partial or total suspension of deliveries pursuant to
Section 22, provided that the effect of such uncontrollable force is
eliminated insofar as possible with all reasonable dispatch. Notwithstanding
the foregoing, until June 8, 2013, Buyer's lack of need for the power
generated by the Facility or its inability to economically market the power
generated by the Facility, shall not be considered an uncontrollable force
under Section 22.
(c) If Buyer incurs a Short-Fall Payment, during any subsequent year
in which Buyer's purchases exceed 1,500,000 tons, Seller shall afford Buyer a
dollar-for-dollar credit for any previously paid Short-Fall Payment, against
amounts otherwise owing by Buyer for its annual purchases in excess of
1,500,000 tons. Any accrued Short-Fall Payments existing at the end of the
Term, for which credit has not been given, shall be forfeited by Buyer.
(d) Any Short-Fall Payment owing shall be paid no later than January
31 of the year following the year giving rise to it.
(e) For purposes of this Section 15, whether a planned outage is
contemplated (as of April 1 of any year) by the Buyer for the Facility, shall
be determined based on prudent utility practice.
(f) If Buyer has reason to believe it will incur a Short-Fall
Payment for any year, or if Buyer actually incurs a Short-Fall Payment for
such year, Buyer shall have the right, upon reasonable prior notice to
Seller, to divert coal purchased hereunder to other generation facilities
owned or controlled by Buyer or any affiliate of Buyer until such time as the
Short-Fall Payment
20
has been eliminated or recouped in accordance with the provisions of this
Section 15. At Buyer's request with respect to any such coal, Seller shall
deliver the coal to Buyer at the Clovis Point loadout facility (for railcars)
or the Mine's truck loadout (for trucks), and Buyer shall reimburse Seller
for any incremental cost incurred by Seller in delivering the coal to the
alternate delivery point and loading it into Buyer supplied railcars or
trucks, net of any cost savings Seller incurs by delivering the coal to the
alternate delivery point and not having to transport the coal from the face
of the Mine to the place of delivery specified in Section 5.
SECTION 16. INVOICES AND PAYMENTS.
(a) Seller shall invoice Buyer by delivering a hard copy invoice to
Buyer by the fifth day of each month for (i) the coal ordered to be delivered
for that calendar month per Section 3 at an amount estimated under the
provisions of Sections 10, 11, 12 and 13 together with (ii) an adjustment,
credit or debit, for actual coal sold the previous calendar month based upon
the actual Purchase Price for that month (including adjustments contemplated
in Sections 12 and 13, if any, for prior months' coal deliveries). For the
purposes of determining the estimated price for the current month in (i)
above, Seller shall use the actual Purchase Price for the prior month as
described in (ii). Buyer shall pay each invoice to Seller by the fifteenth
day after receipt of a hard copy of the invoice. In the event Buyer fails to
pay the undisputed portion of any invoice when due, or in the event Seller
fails to issue an undisputed credit to Buyer in a timely manner, then Buyer
or Seller, as the case may be, shall pay interest on the undisputed amount
until paid/credited at a per annum rate equal to the from time to time "prime
rate" as published in THE WALL STREET JOURNAL plus two percent.
(b) It is understood that some costs which are to be included in the
Government Impositions portion of the Purchase Price may not be known or
determinable on the date ▇▇▇▇▇▇▇▇ are made for the coal for which such costs
are incurred; and in that event retroactive adjustments and appropriate
▇▇▇▇▇▇▇▇ and credit statements shall be made at such time that such costs
become known and determinable. If Seller fails to make an adjustment in
▇▇▇▇▇▇▇▇ or notify Buyer in writing of the potential for an adjustment in
▇▇▇▇▇▇▇▇ related to Government Impositions within two years from the date
information is reasonably available to Seller to fully determine the actual
amount of the adjustment, Seller shall be barred from making that adjustment.
If Buyer fails to protest to Seller in writing within two years of a date
when information is reasonably available to Buyer to determine that an
adjustment included in a billing received prior to that date is incorrect,
Buyer shall be barred from contesting that adjustment even if the adjustment
was incorrect.
(c) If at any time Buyer desires to receive assurances of the
accuracy of Seller's records affecting the price adjustments provided for
herein, Buyer may request Seller to authorize a nationally recognized
independent certified public accounting firm doing Seller's auditing work at
the time of the request to audit Seller's records and certify the accuracy to
Buyer of certain information so requested. If Seller does not have a
nationally recognized accounting firm retained at the time of the request, a
nationally recognized accounting firm shall be selected upon mutual agreement
of the parties hereto. The information requested must be relevant to the
amount of any price adjustment herein. The accounting firm's charges for any
work requested of it under this provision shall be paid by Buyer.
Notwithstanding the foregoing,
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not more often than once in each calendar year, Buyer shall have the right to
examine and audit Seller's records with respect to all price adjustments made
or required to be made pursuant to Sections 10, 11, 12 and 13.
SECTION 17. NO RESTRICTION ON COAL RESERVES OTHER THAN DEDICATED RESERVES.
This Agreement shall not restrict Seller from mining, selling,
using, committing, dedicating, mortgaging or encumbering in any manner the
Coal Reserves other than the Dedicated Reserves for any purpose.
SECTION 18. INSPECTION.
Each party shall at all reasonable times have the right to enter
upon the premises of the other to inspect the coal receiving equipment and
the weighing, measuring and testing facilities. Buyer shall at all reasonable
times have the right to inspect the Mine, maps and operating records of
Seller relating to the operation of the Mine.
SECTION 19. NORTH CONVEYOR SYSTEM.
Seller is the owner and operator of the North Conveyor System, which
is defined as the truck ▇▇▇▇▇▇, the primary crusher conveyor linking the
primary crusher to the secondary crusher, the secondary crusher and all
related facilities being located in the north pit of the Mine.
(a) During the Term, Seller shall make the North Conveyor System
available to Buyer as a backup, standby system for the delivery of coal to
the Facility in common with the Seller's use of the North Conveyor System for
its own purpose.
(b) As long as Seller owns the North Conveyor System, all operations
and maintenance expenses of the North Conveyor System and capital additions
and replacements shall be borne 57.6% by Buyer and 42.4% by Seller commencing
January 1, 1978; provided, however, capital additions or replacements to such
System made by Seller without the prior written consent of Buyer shall be
borne by Seller; and further provided that all costs of operation and
maintenance shall be bone by Seller during such period that the North
Conveyor system is used exclusively by Seller.
(c) Seller reserves the right to dismantle and dispose of or abandon
the North Conveyor System at any time, but in such event, Seller shall give
written notice of such intent to Buyer. Within 60 days of receipt of such
notice, Buyer shall have the option to purchase the North Conveyor System for
a consideration to be determined by mutual agreement of the parties or,
absent such agreement, by appraisers mutually selected by the parties. In the
event Buyer exercises the option to purchase the North conveyor System by
giving written notice thereof to Seller during said 60-day period, Seller
shall convey the North Conveyor System to Buyer upon payment by Buyer to
Seller of the agreed upon or appraised price. If such option is not exercised
within the 60-day period, Buyer shall have no further right or interest in
the North Conveyor System.
22
SECTION 20. ASH DISPOSAL.
Seller shall furnish a site without improvements on Seller's
property at its Mine for the disposal of fly ash and bottom ash from the
Facility during the Term at no additional cost to Buyer but subject to the
terms and conditions set forth in that certain Amended and Restated Waste
Disposal Agreement for Wyodak Unit No. 1 and the ▇▇▇▇ ▇▇▇▇▇▇▇ Plant dated as
of June 15, 1995, among Seller, Buyer and Black Hills Corporation. Seller
reserves the right from time to time to designate and to change the
designation of the particular location and method for such disposal so that
the disposal of such ash will conform to Seller's mining and reclamation
program. Seller shall furnish Buyer reasonable access to and from the
disposal sites, but shall not be required to provide road maintenance. Seller
shall not be responsible for the cost of transporting such ash from the
Facility to the site designated from time to time for disposal.
SECTION 21. INTENTIONALLY OMITTED.
SECTION 22. UNCONTROLLABLE FORCE.
If, because of uncontrollable force, either party hereto is unable
to carry out any part or all of its obligations under this Agreement, and if
such party promptly gives to the other party hereof notice of such
uncontrollable force, then the obligations of the party giving such notice
shall be suspended to the extent made necessary by such uncontrollable force
and during its continuance, provided the effect of such uncontrollable force
is eliminated insofar as possible with all reasonable dispatch. The term
"uncontrollable force" as used herein shall mean any cause beyond the control
of the party and which, by the exercise of reasonable diligence, the party is
unable to overcome and shall include but not be limited to acts of God, acts
of the public enemy, insurrection, riot, strike, labor dispute, labor or
material shortage, fire, explosion, flood, breakdown of or damage to a plant,
equipment or facilities, interruption of transportation, embargo, orders or
injunctions of a federal, state or local court, agency or governmental body
having jurisdiction, acts of civil or military authority, failure of
equipment, or inability to obtain materials, supplies, or equipment from
others because of similar causes. It shall be considered an uncontrollable
force and shall relieve Seller from performing its obligations under this
Agreement if valid state or federal legislation is enacted which prohibits
the strip mining of the federal coal which has been leased by Seller.
SECTION 23. BUYER'S RIGHTS TO MINE COAL FROM DEDICATED RESERVES DURING
PERIOD OF UNCONTROLLABLE FORCE.
During any time and from time to time that Seller is not delivering
coal as required by this Agreement due to uncontrollable force as provided in
Section 22, Buyer shall have the right, after giving Seller at least two
months' notice of their intent to do so, to mine coal for the Facility from
the Dedicated Reserves (or, upon mutual agreement of the parties, other Coal
Reserves in closer proximity to or at the face of the existing Mine works).
The exercise of such right shall be subject to obtaining all necessary
governmental approvals therefor, and any such mining shall be conducted in
conformance with all governmental laws and regulations applicable thereto.
Buyer shall pay Seller the Purchase Price for the coal mined by Buyer under
this Section less the actual costs incurred by Buyer in obtaining the right
to and in mining and delivering such coal
23
including all Government Impositions due as a result of such mining. Subject
to Buyer incurring all of the expense thereof, Seller shall use its best
efforts to assist Buyer to obtain such governmental approvals as it may need
for the exercise of its rights under this Section 23. Buyer shall assume all
obligations to pay all costs relating to such mining of the Dedicated
Reserves which may exceed the Purchase Price. The rights granted in this
Section shall terminate at such time that Seller has restored the deliveries
of coal in the fulfillment of this Agreement.
SECTION 24. DISPUTE RESOLUTION.
If any dispute arises under this Agreement, such dispute shall be
resolved pursuant to the provisions of this paragraph 24.
a. The parties shall meet through authorized officers (or
representatives with full authority to resolve issues on behalf of the
parties) of the companies in a good faith attempt to resolve the dispute.
Prior to such meeting, the parties shall prepare short summaries of their
respective positions with respect to each of the disputes, which summaries
shall be exchanged with the other parties not less than 48 hours prior to the
meeting. With respect to any unresolved dispute that remains after this first
meeting, the parties agree that officers of the respective companies shall
meet in person within 15 days after the first meeting in an effort to resolve
the remaining disputes; and if, after the meeting among the officers of the
respective parties has occurred, there remain outstanding any unresolved
disputes, each party shall prepare a short summary of each remaining claim
(the "Submitted Issues") for submission to binding arbitration pursuant to
subparagraph (b) hereof.
b. Within 10 days after the determination that the parties are
unable to resolve any of the Submitted Issues pursuant to subparagraph (a)
above, the parties shall jointly select an independent, third-party to act as
arbitrator for the Submitted Issues. The arbitrator shall be a certified
public accountant, mining engineer or other qualified professional with
nationally recognized expertise in matters relevant to the resolution of the
Submitted Issues and shall have no past or current relationship with any of
the parties hereto including any affiliates of such parties (the
"Arbitrator"). If the parties are unable to agree on the selection of the
Arbitrator, then the Arbitrator shall be selected by the American Arbitration
Association, using the criteria set forth herein.
(i) Within 10 days after selection of the Arbitrator,
Seller and Buyer shall each submit to the Arbitrator a written position
statement with respect to each of the Submitted Issues. Such statements shall
include a short summary of the party's position along with a statement of
such party's last best offer with respect to the issue of the required
adjustment. Any applicable accounting guidelines or other materials may be
included with the submission. The Arbitrator may thereafter decide whether a
meeting will be called in which each party may present orally the position
stated in its submission and the Arbitrator may make such inquiries as he or
she deems appropriate. Any such meeting shall be held, if at all, in Denver,
Colorado within 20 days of the submission of the materials to the Arbitrator.
(ii) Thereafter, within 15 days of the meeting (or, if no
meeting is called by the Arbitrator, within 30 days after the submission of
the materials to the Arbitrator), the Arbitrator shall issue his or her
award. The award shall set forth the resolution of each of the Submitted
24
Issues, it being understood that the Arbitrator shall select either the last
best offer made by Seller or the last best offer made by Buyer with respect
to a particular Submitted Issue and that the Arbitrator shall have no
discretion to award any other relief. The Arbitrator shall resolve each of
the Submitted Issues separately and shall issue a written award (the "Award").
(iii) The Award issued by the Arbitrator shall be final and
binding upon the parties with respect to the Submitted Issues unless the
Arbitrator fails to comply with the requirement to select a last best offer
as required by subsection (b)(ii). If the Arbitrator fails to select a last
best offer submitted by one of the parties, then any award entered shall be
invalid and the matter shall be resubmitted to arbitration. All such amounts
shall be either credited against or for the account of Buyer or Seller as the
case may be. The fees and expenses of the Arbitrator shall be divided equally
between Seller and Buyer. Any other fees and costs shall be the
responsibility of the party incurring them.
SECTION 25. NOTICES.
Unless otherwise expressly provided herein, all notices required to
be given by the provisions of this Agreement shall be deemed to be duly
served if given in writing sent by United States mail, postage prepaid, or by
telecopy or other electronic mail media and to the addresses set forth below:
If to Seller:
Mailing Address: Wyodak Resources Development Corp.
▇.▇. ▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Street Address: ▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇
Vice President-Fuel Resources
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
If to Buyer: PacifiCorp
▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
General Manager - Fuel Resources
Phone Number: (▇▇▇) ▇▇▇-▇▇▇▇
Fax Number: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 26. APPLICABLE LAW.
25
This Agreement shall be considered to have been entered into and
shall be interpreted under the laws of the State of Wyoming.
SECTION 27. AMENDMENT.
No provision of this Agreement may be amended, modified,
supplemented or waived except by an instrument in writing signed by Seller
and Buyer.
SECTION 28. SUCCESSORS AND ASSIGNS.
This Agreement and all the terms and provisions hereof shall be
binding upon and inure to the benefit of the respective successors and
assigns of the parties hereto. This Agreement and any interests, rights or
obligations under this Agreement may not be assigned by any party without the
prior written consent of the other parties, which consent shall not be
unreasonably withheld or delayed.
SECTION 29. COMPLETE AGREEMENT.
Except as expressly set forth in the Settlement Agreement, this
Agreement supersedes and cancels the Prior Agreement and constitutes the
complete agreement of the parties.
SECTION 30. EXECUTION IN COUNTERPARTS.
This Agreement may be executed by the parties hereto on separate
counterparts, each of which when so executed and delivered shall be an
original, but all such counterparts shall together constitute but one and the
same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their respective officers thereunto duly authorized as of
the date first above written.
WYODAK RESOURCES DEVELOPMENT CORP.
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------
Attest:
/S/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
(Corporate Sea1)
PACIFICORP
By /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
--------------------------------
Attest:
/S/ ILLEGIBLE
-------------------------
(Corporate Sea1)
26
The undersigned hereby consents to the termination of the Prior Agreements as
to Seller and Buyer as set forth herein and in the Settlement Agreement
referenced herein.
BLACK HILLS POWER, INC.
By /s/ ▇▇▇▇▇▇ ▇. OLMACHER
--------------------------------
Attest:
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------
(Corporate Sea1)
All annexes to the new restated and amended coal supply agreement are omitted
from this Exhibit 10.4. These annexes provide details of coal leases, surface
rights, access easements, point of delivery drawings, sample calculations and a
reserve plat and are immaterial to an investment decision. The Registrant will
furnish supplementally a copy of any omitted annex to the Commission upon
request.
27