SAN SEBASTIAN –Aitor Arregi and Jon Garaño, two of the three top creative talents behind “Loreak” (Flowers), which world premieres Tuesday in San Sebastian’s main competition, are preparing “Aundiya” (Alzo’s Giant).

Set up at “Flowers’” production partners, Irusoin and Moriarti Produkzoiak, two of Basque Country’s most active producers, “Aundiya” marks a further step-up in the international ambitions of Basque cinema: Movie project is a period piece; it requires multiple VFX; some scenes could take place outside Spain.

Irusoin and Moriarti have already teamed with U.S.-based Tom Atencio, the manager of New Order for 18 years, and producer of 2007 docu-feature “Joy Division,” to produce a fiction feature based on docu-pic “Lucio,” a portrait of a legendary anti-Franco anarchist and master forger helmed by Arregi and co-Moriarti founder Jose Mari Goenaga

Fact-inspired, “Aundiya” turns on the celebrated, and misfortunate, Mikel Jokin Eleizegi Arteaga, born into a humble family in 1818 in Gipuzkoa’s Alzo, a hamlet in the Basque Country. Suffering gigantism, he suddenly grew from a normal height to two meters, going on to become the tallest man in Europe, or so it was claimed, reaching 2.42 meters, or 7 feet 11 inches.

“Before the arrival of the railroad, unlike today, the rural parts of the Basque Country was a straight-laced backwater, with the Church exerting an enormous influence. His unexpected growth was “psychologically very hard for the lad at a time that it could be associated with witchcraft, and all matter of explanations,” Irusoin/Moriarti producer Xabi Berzosa said at San Sebastian.

Exhibited in village squares as a freak, “an abortion of nature,” as he himself claimed in one document, the Giant of Alzo was received by monarchs over Europe, including Britain’s Queen Victoria.

Founding Moriarti in 2001 with Jose Mari Goenaga and Berzosa, Garaño and Arregi are currently writing the latest version of the screenplay and will direct, Berzosa said.

Garaño co-directed “80 Days” with Jose Mari Goenaga. Co-penned with Arregi, “Flowers” marks their follow-up. Arregi, who has a short in San Sebastian’s Zabaltegi section, “She Bought It in Zarautz,” co-directed toon features “Glup” (2004) and “Cristobal Molon” (2006).

“For us, ‘Aundiya’ is an unprecedented visual challenge, but a happy one too, opening the door to international co-production,” Berzosa said.

“Aundiya” forms part of a three-tier production strategy at Irusoin/Moriarti: Basque-language movie production, which can involve other collaborators, such as Telmo Esnal and Asier Altuna, whose 2005 social satire “Aupa Etxebeste!” world preemed in Zabaltegi and went on to break box office records in the Basque Country. “The films may have local settings, but we want them to have an international reach as well,” Berzosa said.

A second line: Occasional, strategic co-production with other Spanish companies on ambitious titles from name directors, Irusoin and Moriarti bringing their infrastructure and co-financing potential to the table.

Moriarti and Irusoin also aim to move into international production with the U.S. That can cut several ways, including servicing U.S. shoots, Berzosa said. Another option is co-production, such as on a fiction feature inspired by “Lucio,” with Atencio.

Screened at 2007’s San Sebastian Festival to acclaim, the docu-feature portrays Lucio Urtubia, a Basque bricklayer, smuggler anarchist and forger on a massive scale of Citibank checks, all in the name of anti-Franco and anti-capitalist causes. Camus, Breton and Che Guevara figured among his acquaintances.

Atencio & Associates and Moriarti/Irusoin have the project under development. It is budgeted at about €20 million ($26 million), Berzosa said. A former MGM music exec, Atencio went on to produce the docu-feature “Joy Division,” “a stylish doc,” per Variety’s enthusiastic review.

“Aundiya’s” announcement also comes as intimate suspense drama “Loreak” (Flowers), about three women inexplicably regaled by flowers becomes the first movie shot in the Basque language to ever play San Sebastian’s main comptition.

That is not the only sign of new traction in the Basque film industry. Two films at least, “Fuego” and “The Contents of Silence,” look set to become the first to draw down preferential 30% tax breaks, channeled through an AIE tax scheme.

The Basque Government is advancing on plans to open up its advantageous tax regime to international shoots.