The Bulgarian Government has tied in the withdrawal of the 75 million euro claim lodged by CCG Insaat Sanayi Yatirim Ve Turizm of Turkey with the International Court of Arbitration (IIA) against Bulgaria's power grid operator National Electric Company (NEC) with the construction of Tundzha dam.

Bulgarian Economy and Energy Minister Petar Dimitrov made the announcement a day after the visit of Turkish Prime Minister Recep Tayyip Erdogan in Bulgaria.

A number of sources, quoted by Dnevnik daily on March 31, said Dimitrov had a series of meetings with businessman Mahmoud Ceylan, who was part of the Turkish delegation in Bulgaria. CCG Insaat, which inherited the claims from Ceylan, filed the lawsuit in summer last year and currently the litigation is ongoing in the Geneva court.

According to local lawyers, Ceylan has all chances to win the lawsuit. The Turkish company claims that it suffered losses on NEC's decision to pull in a new strategic investor in the Gorna Arda cascade. NEC is also said to have defaulted on its commitment to lay aside all the revenues from Turkey-bound electricity exports for the construction of Gorna Arda.

The claim also deprived the company off the right to challenge the revocation by the government of the 35-year concession for the dam. Dimitrov also said that the Government would shortly look for an investor into the yet-to-be-built Gorna Arda cascade.

“The altercations related to Gorna Arda created negative attitudes toward Bulgaria with our western neighbours, as do build a poor impression with Turkish companies regarding the Government's capacity to implement commitments assumed with Turkish companies,” the minister said.

He argued that Gorna Arda, alongside the Maritsa highway, should have already been built. Italy's Enel, Norway's Statkraft, Austria's Alpine Bau (now building the Tsankov Kamuk hydro-power project), as well as CEZ, were all interested in the project, according to Dimitrov.

Ceylan was contracted to build Gorna Arda in 1998 under a bilateral cooperation agreement in the fields of energy and infrastructure. The agreement also saw Bulgaria exporting electricity for a 10-year period. Turkey halted electricity exports five years ago. The agreement also gave Turkish companies the right to participate in joint ventures for the implementation of energy and infrastructure projects in the Gorna Arda dam and the Orizovo-Kapitan Andreevo road section.

Recently, Bulgarian Prime Minister Sergei Stanishev announced the Government would be seeking to annul the 1998 agreement.

Chances to push the Tundzha dam project through now appear remote at best, because its investment backlog is in the 60-80 million euro range, whereas it allows for hydro-power capacity of maximum 11 MWh.