EVN signs MOU to build Bulgaria hydro project

SOFIA, May 27 (Reuters) - A consortium of Austria's energy utility EVN (EVNV.VI) and Alpine Bau has signed a memorandum of understanding with Bulgaria's state power utility NEK to build a long-delayed hydropower project, NEK said on Wednesday.

Under the agreement, the EVN-led group will take part in a project that includes the building of hydropower stations and renovating existing dams at Bulgaria's Gorna Arda river near the border with Turkey.

"The memorandum confirms their interest. It also gives four months to Bulgaria to decide how to restructure the project," a NEK spokeswoman said.

A senior government official told Bulgarian daily Klasa that the consortium was ready to invest 600 million euros ($836.6 million) in the Gorna Arda project, that was part of an energy deal between Bulgaria and Turkey, signed in 1998.

It was initially to be built by Turkish CCG, part of the Ceylan conglomerate. NEK kept 70 percent in the joint venture.

But construction never got under way as the conglomerate's Bank Kapital was put under administration in 2000.

The NEK spokeswoman said Bulgaria would seek to keep a majority stake in the new venture and the partners were yet to decide how to develop the project.

In 2007, CCG initiated arbitration proceedings in a Paris commercial court, seeking 75 million euros in damages from NEK over the stalled project.

But Bulgarian officials say CCG will withdraw its claim by July as it has reached an agreement to sell its 30 percent stake to the EVN-led group.

The Balkan country has been seeking to revive the project in a bid to meet growing domestic power demand and European Union targets to reduce greenhouse gas emissions. (Reporting by Tsvetelia Ilieva; editing by James Jukwey)