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The WEF supply contract, also entered into in 1983, was
between Santa Fe and WEF, a nonprofit cooperative comprising a
group of relatively small electric utilities. WEF, in turn,
would sell the coal to another cooperative, Plains Electric
Generation & Transmission Cooperative, Inc. (Plains), for use in
its Escalante Power Plant. Although the WEF supply contract is
primarily between Santa Fe, as the seller, and WEF, as the buyer,
that supply contract identified Plains as the guarantor of WEF’s
performance under that contract. That contract contained the
recitation that WEF and Plains “desire to secure a reliable and
reasonably priced supply of coal of the quality and quantities as
set forth herein for use in the generation of electricity in Unit
I, and potentially in an additional Unit II, of the [Escalante]
Station.” That contract also contained a price renegotiation
provision that took effect in 1993 under which WEF could
terminate the contract if a new long-term coal price were not
negotiated.
On account of WEF’s deteriorating financial condition, it
sought to renegotiate its contract. During 1990 the pricing
provisions were modified resulting in coal price reductions and
changes in other contract provisions. The renegotiated WEF
contract ran until December 31, 2004, and could be extended for
up to three 10-year periods by either party. Each 10-year
extension depended on the parties’ ability to renegotiate and
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