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Serbia Moves Closer to Power Deal Renewal With Germany’s RWE

Sept. 8 (Bloomberg) -- The Serbian government approved the signing of an agreement between state-owned Elektroprivreda Srbije and German utility RWE AG as it seeks to increase power production capacity.

The decision allows Energy Minister Zorana Mihajlovic to sign the Memorandum of Understanding and Strategic Partnership with RWE in Berlin next week, Dejan Milekovic, spokesman for the minister, said in a phone interview. The deal will “ensure stable and continued growth of the energy sector in Serbia,” the government’s press office said in an e-mailed statement.

RWE’s investment through a joint venture with Elektroprivreda may exceed 2.2 billion euros ($2.82 billion), the Tanjug news agency reported, citing Deputy Premier Aleksandar Vucic, who will also travel to Berlin next week. That will include 1.2 billion euros to add a third unit to Serbia’s lignite-fired Termoelektrana Nikola Tesla B plant, and about 1 billion euros in hydropower plants on the River Morava and the River Drina.

Serbia seeks to lure foreign investment to pull its economy out of recession, narrow its current-account deficit and become self-sufficient in power production.

Serbia would repay RWE “not in cash but through green energy” and the arrangement may also include construction of pumped-storage Djerdap 3 hydro plant on the Danube River, Vucic told Tanjug without elaborating.

RWE and Elektroprivreda signed a preliminary agreement in 2009 that was to add as much as 3,000 megawatts of hydropower capacity in the Balkan country.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: Rachel Graham at rgraham13@bloomberg.net

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