* China approves 800 mln euro loan to Serbia's EPS
* Serbia plans reconstruction of coal-fired plant
* Investment to boost production by up to 40 pct
By Ivana Sekularac
BELGRADE, Jan 26 (Reuters) - China has approved an 800
million euro ($1.1 billion) loan to help Serbia expand a
coal-fired power plant, its first investment in the Balkan
state's energy sector, a Serbian utility official said.
Serbia did not give details on loan terms but it plans to
use the money to boost capacity at the 1,010 megawatt plant at
Kostolac, some 100 km from Belgrade.
The plant is Serbia's second-largest coal-fired power plant
and generates about 14 percent of its total electricity.
"With that money, we are going to begin reconstruction of
two 350 megawatts blocks in Kostolac coal-fired power plant this
year," Aca Markovic, Chief Executive of Serbia's state-run
utility EPS, told Reuters on Tuesday.
"Ultimately, the expansion of the mine will enable us to
build another block in the thermal plant with capacity of
between 350 and 600 megawatts".
"Once the investment is completed, Kostolac could raise its
production by 30 or 40 percent depending on capacity of the new
block," he said.
"I cannot reveal terms for the loan, but it will be
favourable for Serbia with a grace period," Markovic said. "The
loan was agreed by Serbian and Chinese government officials and
is a result of good diplomatic relations between the two
countries.
"The preliminary contract on the loan will be signed in two
weeks."
Serbia produces 70 percent of its power from coal-fired
plants and the rest from hydropower. It urgently needs to
upgrade its ageing energy infrastructure, which was damaged and
then fell into disrepair during the Balkan wars of the 1990s.
Serbia will also use part of the money to develop a nearby
coal mine that supplies the plant and invest in an environmental
protection programme, Markovic said. Equipment and technology
for these projects will come from China, he added.
"The contract will determine the role of a Chinese company
that will provide the technology and equipment," he said. "China
is very interested in investing in Serbia's energy sector".
China was considered the Balkan nation's closest ally, along
with Russia, when Serbia faced international isolation in the
1990s.
In addition to the China-funded project, Serbia last year
called a tender for construction of two coal-fired power plants
with the combined capacity of 1,400 megawatts.
Germany's RWE <RWEG.DE>, Italy's Edison <EDN.MI> and Cezch
CEZ <> are interested in projects.
(Editing by Michael Kahn and Anthony Barker)
