SOFIA (Reuters) – US-based utility AES will launch construction of a long-delayed $1.2-billion coal-fired power plant in Bulgaria by the end of the year and will start producing electricity in 2008, it said yesterday. The deal is key to Bulgaria’s efforts to remain the largest energy exporter in the Balkans. The new plant is to replace lost capacity from two reactors at the Kozloduy nuclear plant, which are due to be mothballed before the country joins the EU in 2007. AES agreed to build the new 670-megawatt plant – one of its biggest-ever projects and Bulgaria’s largest foreign investment deal to date – at the Maritsa East power complex in 2001, but the plan stalled when AES was unable to secure funding. Now the company is in the closing stages of negotiations with the government and Bulgarian power-exporting monopoly NETC, said Robert Hemphill, AES executive vice president for global development. «We expect to start construction by the end of the year,» Hemphill told a news conference. «We expect the first unit of the plant to come on line and begin producing power in 2008. The second unit should come on line and begin producing power in 2009.» French engineering major Alstom will be the main contractor to build the plant’s two, 335-megawatt units, which will be fueled by brown coal mined from the Maritsa East complex. Hemphill said AES would finance 30 percent of the project on its own and is in the final stages of securing the remaining 70 percent in debt financing from a group of banks led by ING, Calyon and BNP Paribas. The European Bank for Reconstruction and Development may also take part in the financing for a stake worth up to 150 million euros, but that is still subject to further talks, he said. AES, which will fully own and operate the generator, expects the plant to have a lifespan of 40 to 50 years. Bulgaria’s current installed generation capacity is estimated at around 10,000 megawatts, but that will temporarily fall by around 9 percent when it shuts down the two aging 440-megawatt Soviet-era reactors at Kozloduy in 2006.