On November 21, Serbia's second largest coal-fired power plant was opened, a new 350 MW generating facility, the first new generation capacity in Serbia in almost 30 years.
This $ 613 million project is part of a broader agreement between Serbia and China. The agreement includes the expansion of nearby coal mines and the upgrading of the existing capacity of the Kostolak coal-fired power plant.
The Export-Import Bank of China will provide 80% of the entire project with a 20-year loan amounting to a total of 715 million U.S. dollars. The Serbian government will provide the remaining funds.
China Machinery Engineering Company is responsible for construction projects.
Milenko Grcic, chief executive of Elektroprivreda Srbije (EPS), a power company in Serbia, told reporters the project is expected to be completed by 2020 and will follow the highest environmental standards.
Two-thirds of Serbia's electricity comes from aging coal-fired power plants, while the rest come from hydropower. The current situation urgently needs to upgrade the energy infrastructure to meet the growing demand for electricity.
The energy sector in Serbia has been under severe pressure since the flood in 2014, when a mine that supplied Serbia's largest coal-fired power plant was affected. January-March this year, due to the temperature drop, coal production fell, power production in Serbia dropped by more than 15%.
Western Balkan countries, including Bosnia, Kosovo, Montenegro and Serbia, plan to invest billions of euros to build new coal-fired power plants to meet the growing power demand as aging plants are phasing out.
But environmentalists are worried coal investment may be counterproductive as governments may be forced to spend hundreds of millions of euros to upgrade coal-fired power plants to meet EU environmental standards.
Chinese investors are increasingly targeting projects in the Balkans, enhancing their sense of presence and demonstrating their willingness to take greater risks than their European counterparts to open up potentially lucrative markets.