A loan agreement for 226 million euro was signed on July 9 by the Ministry of Energy and Energy resources, the Ministry of Finance, and the Japan Bank for International Cooperation (JBIC).

The loan is designed for the rehabilitation of generating units one to four of the Maritsa Iztok Two thermal power plant and the construction of a gas desulphurisation plants for units five and six.

The loan is repayable over 14 years with a four-year grace period and fixed annual interest of 1.49 per cent. It will be provided and repaid in euro, eliminating currency exchange risk. The provision of a government guarantee is subject to the condition that the Japanese invest an amount equal to 10 per cent of the guarantee, or 23 million euro.

According to Energy and Energy Resources Minister Milko Kovachev, the rehabilitation project will make it possible to use Bulgarian coal but prevent air pollution by applying environment-friendly technologies.

The project seeks to increase the capacity of the first four generating units of the power plant from 600 to 700 megawatts and extend the life of the power plant by 20 years, Kovachev said.

The feasibility study was conducted by Toshiba Corporation and Chubu Electric Power Company, and was paid by a grant from the JBIC.

Maritsa Iztok Two, which has eight units with a total capacity of 1450 megawatts, is located at the Maritsa Iztok lignite coal-mining complex in Southern Bulgaria and generates 30 per cent of the country's power. Maritsa Iztok Two is also the largest thermal power plant in the Balkans.

Japanese Ambassador to Sofia Yasuyoshi Ichihashi said the project is particularly important for the future of the Bulgarian energy sector and for the two countries in general.

According to Aya Mamazaki, Director at the JBIC, the contractors under the project will do their best to apply state-of-the art technologies.

With the signing of the loan agreement and the resolution of a dispute with the Competition Protection Commission on the size of the state guarantee, all barriers before the implementation of the project have been cleared.

In a related development on July 8, the cabinet adopted a letter of support for the construction of the desulphurisation facilities at Maritsa Iztok Two, which is funded by the European Bank for Reconstruction and Development.

The pollution-control installations will cost 66.6 million euro. The EU ISPA programme will grant 30 million euro, another European financial institution will lend another 30 million euro, and the plant will provide 6.6 million euro from its own funds.

Back in 2003, the Government decided that Maritsa Iztok Two would remain state property.

The plant has been operating for more than 35 years but its four oldest units need to be rehabilitated. This will be two to four times cheaper than to build new facilities with a similar capacity.

- Business Staff