US-based AES has welcomed the deal it signed with Bulgaria to amend the long-term power purchase agreement which its Bulgarian power plant AES 3C Maritza East 1 has with state-owned National Electricity Company (NEK).

Under the framework set forth in the heads of terms agreement (HTA) signed on Wednesday AES 3C Maritza East (AES Galabovo) will cut its capacity price by 14% which will result in annual savings for NEK of some BGN 50 M (EUR 25 M), NYSE-listed AES Corporation said in a statement.

Cumulative savings for NEK will be about BGN 550 M over the remaining term of the power purchase agreement which expires in 2026.

In exchange, NEK will pay the lignite coal-fired power plant its full outstanding receivables, which as of March 31, 2015 were approximately USD 236 M. A binding agreement is expected to be signed by the third quarter of the year, according to the statement.

“This agreement is one component of the Government of Bulgaria’s plan to strengthen the liquidity position of Maritza’s offtaker, NEK. It is a win-win proposition that helps to create a sustainable electricity sector,” AES President and CEO Andres Gluski commented. 

The Executive Director of AES Bulgaria, Olivier Marquette, said in a separate statement that with the agreement, “AES is contributing to the restructuring of the energy sector in Bulgaria, and demonstrates its support to the government’s efforts to stabilize the sector through deep and broad reforms.”

NEK signed HTAs with AES 3C Maritza East 1 and majority US-owned ContourGlobal Maritsa East 3 coal-fired power plant on Wednesday, under which it will pay BGN 1 B (EUR 500 M) less than originally agreed to the two plants for the electricity they produce over the next 10 years.

NEK and the two power plants signed a memorandum of understanding in February allowing for a decrease in the purchase price of electricity they generate to allow the state-owned company to repay outstanding debt amounting to around BGN 800 M.