Coal Supply Confirmation Letter
Confidential information has been omitted from this Exhibit and filed separately with the Commission pursuant to a confidential treatment request under Rule 24b-2.
Exhibit 10.4
CONFIRMATION LETTER
| Kennecott #: 711 | ||||||
Buyer: | Otter Tail Power Company, a division of Otter Tail Corporation NorthWestern Corporation, d/b/a NorthWestern Energy Montana-Dakota Utilities Co., a division of MDU Resources, Inc. c/o Otter Tail Power Company As Agent for Big Stone Plant P. O. Box 496 215 South Cascade Street Fergus Falls, MN ###-###-#### | Seller: | Kennecott Coal Sales Company Caller Box 3009 (82717-3009) 505 South Gillette Avenue Gillette, WY 82716 | |||
Attn: | Stacie Hebert | Attn: | Bruce Miller | |||
Phone: | 218 ###-###-#### | Phone: | 307 ###-###-#### | |||
Fax: | 218 ###-###-#### | Fax: | 307 ###-###-#### | |||
This Confirmation Letter (“Confirmation”) shall confirm the transaction arranged October 31, 2003, between Otter Tail Power Company, a division of Otter Tail Corporation (“Otter Tail”) and Kennecott Coal Sales Company (“Kennecott”) pursuant to the Master Coal Purchase and Sale Agreement effective June 1, 2004. The terms and conditions of this transaction are as follows:
Kennecott to sell and deliver and Otter Tail to purchase and receive.
Transaction Type: | Physical Coal | |
Product: | Sub-Bituminous coal; (*) Btu/Lb. and (*) Lbs. SO2/mmBtu | |
Base Price: | (*) per ton of coal | |
Shipment Period: | January 1, 2005 through December 31, 2007 |
Quantity:
| Tons | ||||
| Delivery Year | (to the nearest unit train) | |||
2005 | (* | ) | ||
2006 | (* | ) | ||
2007 | (* | ) | ||
Delivery Point: | FOB Railcar, Cordero Rojo Complex – Campbell County, Wyoming | |
Topsize: | 2” x 0” ASTM |
1
| Quality: | Coal Quality Specifications | |||||||
| Section 9.03 – Standard Btu and Sulfur for price adjustments as set forth below: | Sections 6.02 & 6.04 Rejection Limits/ Non-Conforming Shipment | |||||||
| Btu/Lb | (*) | (*) | ||||||
| Lbs. SO2/mmBtu | (*) | (*) | ||||||
Btu Adjustment: | To reflect the actual heat content of the coal delivered, each month the Base Price of coal will be adjusted for any variation from (*) Btu/Lb., using the following formula: |
Btu Adjustment Per Ton = P x | (AR – BB) | |
| BB |
Where: | ||||
| P = | The Base Price of coal per ton delivered during the month; | |||
| AR = | The monthly weighted average “As-Received” Btu’s per pound of the respective coal[s] delivered to Otter Tail; and, | |||
| BB = | The Base Btu’s per pound of the respective coal[s] delivered to Otter Tail during the month; the BB value = (*) |
| All shipment Btu’s and weighted average Btu’s shall be in zero decimals. All prices for Btu adjustments shall be calculated using floating-point decimals, with the result being rounded to three decimal places as shown in the following example: |
Sample info: P = (*)/ton, BB = (*), AR =(*)
Example: Btu adjustment per ton | = (*) | |
| = (*) | ||
| = (*) | ||
| = (*) |
Sulfur Adjustment: | To reflect the actual sulfur content of Coal delivered, each month the Base Price of Coal will be adjusted in accordance with the following formulas. | |
| For purposes of this adjustment, it shall be assumed that 100% of the sulfur in the Coal will be converted to sulfur dioxide (“SO2”). The pounds SO2 per mmBtu shall be calculated in accordance with the following formula based on Seller’s lab analysis of the percent sulfur in the Coal and the calorific value of the Coal: |
Lbs. SO2/mmBtu = | Monthly Weighted Average Sulfur % in Coal X 20,000 | |
| Monthly Weighted Average Btu/Lb. |
All shipment sulfur percent and weighted average sulfur percent shall be stated in two decimals. SO2 for the period billed shall be calculated using floating-point decimals, with the result being rounded to two decimal places as shown in the following example: |
Sample info: Monthly Weighted Average Sulfur % in Coal = (*), Monthly Weighted Average Btu/Lb. = (*) |
Example: Lbs. SO2/mmBtu = ((*) X 20,000) / (*) = (*) = (*) |
2
Sulfur adjustment in $/ton of Coal =
| (Base Lb. SO2/mmBtu – Actual Lb. SO2/mmBtu) X Actual Btu/Lb. X $ADI | ||
| 1,000,000 | ||
| ADI = The “SO2 Monthly Average Price” published by Air Daily for the month preceding delivery. | ||
| Base Lb. SO2/mmBtu = (*) | ||
| All shipment SO2 and weighted average SO2 shall be stated in two decimals. All prices for sulfur adjustments are to be calculated using floating-point decimals, with the result being rounded to three decimal places as shown in the following example: | ||
| Sample info: Actual Btu = (*), Base SO2 = (*), Actual SO2 = (*), | ||
| SO2 Allowance (ADI) = (*) |
Example: Sulfur Adjustment in $/ton of Coal | = ((*) – (*)) X (*) X $(*)) / 1,000,000 | |
| = $(*) | ||
| = $(*) |
IN NO EVENT SHALL EITHER PARTY BE LIABLE TO THE OTHER PARTY FOR, AND EACH OF THE PARTIES WAIVES THE RIGHT TO SEEK INCIDENTAL, CONSEQUENTIAL, OR PUNITIVE DAMAGES UNDER THIS AGREEMENT.
Please confirm that the terms and conditions stated herein accurately reflect your understanding of our agreement by signing and returning to Leslie Thorn at Seller’s address.
By: | /s/ Ward Uggerud | Date: | June 22, 2004 | |||
| Otter Tail Power Company, a division | ||||||
| of Otter Tail Corporation | ||||||
By: | /s/ Andrea Stomberg | Date: | June 29, 2004 | |||
| Montana-Dakota Utilities Co., a division | ||||||
| of MDU Resources, Inc. | ||||||
By: | /s/ Michael J. Hanson | Date: | July 14, 2004 | |||
| NorthWestern Corporation, | ||||||
| doing business as NorthWestern | ||||||
| Energy | ||||||
By: | /s/ Kelly A. Cosgrove | Date: | June 1, 2004 | |||
| Kennecott Coal Sales Company |
(*) Confidential information has been omitted and filed separately with the Commission pursuant to Rule 24b-2.
3
