China Eximbank commits $286.7 million for preferential buyer’s credit for Phase 1 of the Kostolac B Power Plant Project (Linked to Record ID#42555 and #107947)

China Eximbank commits $286.7 million for preferential buyer’s credit for Phase 1 of the Kostolac B Power Plant Project On August 20, 2009, the Government of the People’s Republic of China and the Government of the Republic of Serbia entered into an Agreement on Economic and Technical Cooperation in the field of Infrastructure, which entered into force on June 25, 2010.

Then, on December 26, 2011, China Eximbank and the Government of the Republic of Serbia signed a $293 million preferential buyer’s credit (PBC) agreement [CHINA EXIMBANK NO. PBC (2011) 36 Total (187)] for Phase 1 of the Kostolac B Power Plant Project. From December 2018 to December 2019, there appeared to be a reduction in loan value to USD 286,639,000.

It is unclear why a small portion of the loan was cancelled.

Then, on May 28, 2012, the Government of the Republic of Serbia and Elektroprivreda Srbije (EPS) — a Serbian state-owned power company — signed an on-lending agreement [No. 48-2527/2012-1] for Phase 1 of the Kostolac B Power Plant Project.

The proceeds from the on-lending agreement were used to finance 85% of the $344,630,000 cost of the commercial contract [number I-170/48-10 and annex 1 to the contract number 305/13-11] between EPS, Termoelektrane i kopovi Kostolac d.o.o. (a project company and wholly owned subsidiary of EPS), and China Machinery Engineering Corporation (CMEC), which was signed on December 08, 2010.

The loan’s (principal) amount outstanding was $248,642,000 as of December 31, 2018, $219,390,000 as of December 31, 2019, $190,138,000 as of December 31, 2020, $160,886,000 as of December 31, 2021, and $131,634,000 as of September 31, 2022.

Phase 1 involved the reconstruction of 2 existing 350MW power generation units (blocks B1 and B2) at the Kostolac B Power Plant (known locally as ТПП „Костолац Б“), which were originally commissioned in 1987 and 1991. It also involved the construction of a new desulfurization (de-SOx) system.

The Kostolac B Power Plant is located on the right bank of Danube river on the outskirts of the town of Kostolac, which is located within Kostolac Urban Municipality, Pozarevac City, and Branicevo Administrative District. CMEC was the EPC contractor responsible for implementation. Phase 1 commenced in July 2012.

The overhaul of the B1 power generation unit commenced on March 1, 2014. The overhaul of the B2 power generation unit commenced in July 2015.

The construction of the new desulfurization (de-SOx) system commenced on January 5, 2014 and was completed on May 4, 2017.

Upon completion of Phase 1, the Kostolac B Power Plant became the first power station in Serbia to adopt flue gas desulfurization, thereby helping the country meet the EU's stringent emission standards.

Then, in November 2022, the Higher Court in Belgrade ruled in favor of the Renewables and Environmental Regulatory Institute (RERI), ordering that EPS must cut sulphur dioxide emissions at its coal power plants. Kostolac power station was among those impacted. The court utilized medical evidence stating that sulphur dioxide can cause respiratory and cardiovascular diseases.

The lawsuit was filed by RERI in January 2021. Then, in February 2023, EPS announced that Kostolac A would be shut down by the end of 2028.

China Eximbank also financed Phase 2 of the project (as captured via Record ID#42555), which involved the construction of a third 350MW power generating unit (B3) at the Kostolac B Power Plant.

It is expected that, upon completion, the entire power plant — including the two upgraded 350MW units from Phase 1 (B1 and B2) and the third 350MW unit from Phase 2 (B3) — will be able to provide about one-fifth of Serbia’s total electricity supply.