VA Tech Hydro GMBH, which is already helping to build a hydropower plant in the southern Rhodope mountains, agreed to revamp and refurbish three plants in the same region with a total capacity of 270 megawatts.

Another company, Porr Technobau und Umwelt AG, agreed to build a new bloc to the existing Studen Kladenetz plant in the south by the end of 2008.

Part of the 65-million-euro project will be funded under the Kyoto Protocol, Lyubomir Velkov, director of the national electricity company, told journalists Tuesday.

By participating in this scheme, Austria will be able to buy carbon reduction credits from Bulgaria, thus allowing it to meet its targets under the Kyoto Protocol.

The Protocol requires industrialised countries to reduce emissions of carbon dioxide and five other greenhouse gases to levels 5.2 percent lower than what they were in 1990, by 2008-2012.

Countries that can easily meet their targets may sell credits to others who cannot, under Kyoto's emissions trading system.

The Netherlands, Switzerland and Austria have already signed agreements to finance renewable energy source projects in Bulgaria in exchange for carbon reduction credits.

Bulgaria has been eager to trade emissions credits in order to attract investment and boost its industrial activity which slowed down to produce quantities of harmful gases that were far below Kyoto levels, after the fall of communism in 1989 and the collapse of state-owned enterprises.

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