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million tons. The gold mines received by Santa Fe were not
burdened by gold supply contracts.
The TEPCO supply contract began during 1983. In connection
with TEPCO’s 1991 bankruptcy, however, the contract was
renegotiated resulting in a coal price reduction from the
original 1983 contract. The renegotiated contract was for a
period ending December 31, 2009. Either party, however, could
extend the contract for additional 5-year periods if the parties
were able to negotiate a good faith price that reflected the
then-current market price for coal. Under the contract, Santa Fe
was the exclusive supplier of the coal required for the operation
of Units 1 and 2 of TEPCO’s Springerville Station power plant,
and TEPCO was obligated to purchase a specified annual minimum
amount of coal. There was no maximum limit on the amount of coal
that Santa Fe could sell to TEPCO under the contract. The
contract, however, did contain estimates that the combined
requirements of Springerville Station Units 1 and 2 would range
from .6 million to 2.34 million tons per year during the term of
the contract. The quality of the coal was defined in the
contract, and the type of coal specified in the contract was the
type of coal produced in the Lee Ranch mine. Under the contract,
Santa Fe committed to use its best efforts to mine the Lee Ranch
mine’s coal reserves and to sell TEPCO the amount of coal needed
for operation of the Springerville Station power plant.
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Last modified: May 25, 2011