August 30 (SeeNews) - The Bulgarian unit of Italian company PVB Power has suspended a project for the construction of a cascade of small hydro power plants (SHPPs) on the Iskar river as its joint venture with the local municipality set up to implement the project faces decapitalisation issues, local media reported on Tuesday.
PVB Power Bulgaria has decided to freeze the last stage of a 115 million euro ($128.4 million) project for the construction of nine SHHPs as VETs Svoge, in which it holds a majority stake, is threatened by liquidation, Capital Daily said.
Five of a total of nine run-of-the-river SHPPs with a combined capacity of 25 MW have already been built. The project, co-funded by the European Bank for Reconstruction and Development and implemented under a public-private partnership with the Svoge municipality, was due to be completed by the end of 2015.
Recent legal changes in the energy sector seriously are cutting the company's revenues and rendering the completion of the project economically unfeasible, the daily reports, citing a letter from PVB Bulgaria to the Svoge municipal authorities.
Last year Bulgaria adopted legal amendments reducing the amount of power output they can sell at feed-in tariff level and imposing a 5% tax on the monthly income of all electricity producers in the country.
Due to the suspension of the project, VETs Svoge has to write off assets, which results in its decapitalisation in the amount of 15.8 million levs. Instead of raising VETs Svoge's capital PVB Bulgaria plans to increase its stake in the company to 98.5% from 90%.
This move, however, requires the minority shareholder's consent.
According to Capital, VETs Svoge's debts stood at 133.5 million levs by the end of 2015, including 43.5 million euro in liabilities to EBRD.
PVB Bulgaria's business plan, however, envisages that the company repay its credits and turn to profit by 2022, Capital Daily reported.
($= 0.8957 euro)