US-based ContourGlobal has been given preferred bidder status for the construction of the 500MW Kosova e Re coal-fired power plant, the Kosovan ministry of economic development announced on November 20. Construction of the €1bn plant is expected to start in late 2016 or early 2017.

The project will be the largest investment in Kosovo to date, and is expected to solve problems caused by its outdated energy infrastructure. Kosovo, which is rich in brown coal, faces an urgent need to rehabilitate its energy system. In addition to the construction of a new power plant, upgrades to existing coal-fired power plants are needed to prevent frequent interruptions of the power supply.

Plans for the Kosova e Re power plant have been under consideration for a decade, but the signing of the deal between ContourGlobal, the only firm to remain in the competition for the project, and Kosovan government has been delayed due to disagreements over the terms of the contract. The project also faces opposition from environmental groups.

Earlier this month, ContourGlobal and the World Bank reached an agreement for financing the Kosova e Re power plant.

During the negotiations, it was agreed that the plant will have capacity of 500MW instead 600MW previously planned.

A total of 30% of the investments will come from the private investor, minister of economic development Blerand Stavileci told a news conference, according to the ministry statement.

ContourGlobal proposed that the internal rate of return (IRR), which measures the profitability of the project, range between 23% and 27%. However, during the negotiations the company agreed that the IRR would to be lowered to 21%, which is acceptable for the steering committee.

Negotiations on other issues will continue in the next four to six months until the conclusion of a commercial agreement. This will be followed by a tender procedure for the plant’s construction, Stavileci said. The World Bank will continue monitoring the process.

The completion of the plant is expected by end-2021 or early 2022, which will coincide with the decommissioning of the existing TPP Kosova A, which is the biggest polluter in Europe. Kosova A has five units, but only two are operational, each with capacity of 200MW. Kosovo has another TPP, Kosova B, which is awaiting a process of upgrade. It is consisting of two units with capacity of 340MW each.

The efficiency of the new plant’s generation unit is set at 40% or 3% higher than the original plan. The project will address the environmental issues in the best possible way, the ministry said.

The capacity of the new plant is expected to meet the country’s energy needs to a large extend. It will also create thousands of new jobs and will send a good message to other investors, which are partners of the World Bank and other international financial institutions, Stavileci said.