Peabody Natural Resources Company, f.k.a. Hanson Natural Resources Company, Cavenham Forest Industries, Inc., A Partner Other Than The Tax Matters Partner - Page 6

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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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