US power giant AES has begun construction of the Maritza East I lignite-fired 670 MW power plant in Bulgaria, at a cost of US$ 1.4 billion (EUR 1.1 billion).

The plant is the largest foreign investment to date in Bulgaria, and one of the largest green field investments in South East Europe, according to the company. It is expected to begin operations in 2009, providing baseload power to domestic and export markets.

AES has a 15-year power purchase agreement in place with NEK, Bulgaria’s transmission system operator, and a corresponding 15-year lignite supply contract with state-owned mining company, Maritza East Mines. French-based Alstom has a turnkey contract for construction of the plant, using clean combustion technology.

Bulgaria has boasted that it was the fourth largest energy exporter in Europe in 2005, after France, the Czech Republic and Poland, but it could stop exporting altogether once two 440 MW units at its Kozloduy nuclear power plant are decommissioned as part of the country’s EU accession in 2007. This project is one of several designed to replace the generation capacity lost, although others include hydro power plants and the Belene NPP, due to be operational around 2011-12.

As a North American company, AES has competed against the European energy giants for acquisitions elsewhere in Central and Eastern Europe, as one of the original bidders for Electrica Muntenia Sud in Romania.

In terms of generation in the region, AES already owns the 900 MW coal-fired Tisza II plant in Hungary, with two other biomass plants in Hungary and the Czech Republic. Downstream, it has acquired two Ukrainian distribution facilities.

AES has stated that it has a particular interest in investing in Eastern Europe, and contract generation in the Europe, Middle East and Africa (EMEA) region accounted for 9% of AES’ total revenue in 2005.

(THE HEREN REPORTS - EDEM 10088 / 9 May 2006)