Turkey firm files claim against Bulgaria over 170-MW Gorna Arda

CCG, part of Turkey’s Ceylan conglomerate, has filed a claim against Bulgaria’s National Electricity Transmission Co. (NETC) seeking damages of 75 million euros (US$102 million) over a stalled hydropower venture.

CCG, the successor to the Ceylan construction company, accused NETC of failing to start and fund a joint venture to build the three-plant, 170-MW Gorna Arda hydropower project on the Arda River near Bulgaria’s border with Turkey. NETC owns 69.9 percent the joint venture company, while Ceylan has 30.1 percent.

NETC said August 23 it received formal notice that CCG initiated proceedings before the International Chamber of Commerce’s arbitration court in Paris. NETC said it was surprised by the arbitration demand.

“We have fulfilled all our commitments in the joint venture company Gorna Arda,� a NETC spokeswoman said. �Everything else which concerns the governmental agreement from 1998 should be solved at a political level.”

The one-time US$300 million project envisaged construction of the Gorna Arda water cascade, which includes three new hydropower stations totaling 170 MW, and rehabilitation of three existing hydropower stations. Work on the existing stations, which total 274 MW, was expected to cost US$32 million.

In a 1998 deal, Bulgaria agreed to award construction of the hydro complex and a highway to the border to Ceylan Holding, in return for 10 years of electricity exports from Bulgaria to Turkey. However, Bulgaria’s government sought to replace Ceylan with another company to break a deadlock that began when Ceylan’s Bank Kapital was taken over by Turkish banking authorities in 2000.

Bulgaria’s attempts to get Turkish consent to replace Ceylan were unsuccessful. In 2003, Turkey froze power imports because it said Bulgaria had failed to proceed with the project.

Bulgaria had argued that Ceylan’s failure to raise money stalled construction, while Ceylan accused NETC of not using the proceeds from power exports to Turkey to fund Gorna Arda. In 2001, Ceylan turned down NETC’s proposal to buy its shares at 7 percentage points more than their face value or dissolve the joint venture.

In 2002, Bulgaria nearly secured Enel as a third investor in the project. However, the Italian utility declined because of Ceylan’s participation, NETC officials had said.

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