Austrian company EVN has approved a capital hike to boost its stake in the Bulgarian hydro power plant project Gorna Arda to 70%.

The takeover of a 70% stake in the vastly troubled Bulgarian hydro power project on the Arda river in the south from Turkish company Ceylan was expected in the first quarter of 2011, but fell through.

The project company for the construction of the 160 MW cascade will be formed with a 70% of EVN and a 30% share of the Bulgarian National Electric Company NEK.

In July 2010, Austrian utility EVN signed a deal with Bulgaria's state power utility NEK to take a majority stake in the Bulgarian hydropower project. Under the agreement Austrian utility EVN will own a 70% stake, while NEK will hold the remaining 30% in the joint venture.

Back then the opposition Socialist Party criticized the government for the agreement asking how and why the EVN company was selected for the project without a tender, to which Economy Minister Traikov replied no tender was necessary for this specific project under the existing legislation.

The agreement for the construction of Gorna Arda hydropower project in southern Bulgaria, between Austria's energy firm EVN and Bulgaria's dominant state power utility NEK was signed during the visit of Prime Minister Boyko Borisov in Vienna in the middle of July 2010.

Austria's Alpine Bau withdrew from the construction of Gorna Arda hydropower project in the middle of May, leaving energy firm EVN, which holds a 67% stake in one of Bulgaria's three power distributors and serves clients in Southwestern Bulgaria, the sole partner of NEK.

At the beginning of September 2009, Bulgaria's new government sealed a letter of approval for the construction of the hydro power project on the Arda river.

This was a requirement for wrapping up of the sale of a 30,1% stake, owned by Turkey's CCG, part of the Ceylan conglomerate, to an Austrian consortium of EVN and Alpine Bau.

The move was made after a trial in the International Court of Arbitration, in which Ceylan Holding filed claims for EUR 75 M against the other member in the joint venture - Bulgaria's National Electric Company NEK, was suspended for three months.

The Turkish company was contracted to implement the project under an electricity-for-infrastructure swap deal Bulgaria and Turkey signed in 1998, during the term of the government of Ivan Kostov. The launch of the hydropower construction was delayed after the Turkish company ran into financial troubles.

The Gorna Arda hydropower project is expected to cost around EUR 500 M, which should be paid by the consortium. It is planned to have an electricity production capacity of 160 MW.