Interest grows in central and eastern Europe’s energy sector

When Premier Wen Jiabao visited Hungary at the end of June, he made it clear that central and eastern Europe is of key importance to China in terms of furthering and developing its economic relationship with the European Union. Wen stated that: “When we in China pursue the strategy of diversifying foreign trade markets, and encourage Chinese companies to ‘go global’, we take central and eastern Europe as a strategic priority.” He also stated that China should continue to increase investment and enhance cooperation in the development of new energy and the exploitation of natural resources, and encourage joint establishment of industrial parks and high-tech development. He concluded: “China supports competitive Chinese enterprises in investing in central and eastern European countries, and in actively participating in the merger, acquisition and reorganization of enterprises in these countries.” These words illustrate well the recent increase in Chinese interest in what is often termed “emerging Europe” – a term which covers the centre, east and south of the continent.

In particular, there is growing interest among Chinese companies in central and eastern Europe’s energy markets, and the prospect that these companies may make significant investments. The energy sector in emerging Europe appears to have been less affected by the recent economic recession than other sectors of the economy. Existing energy projects have continued and new projects have been initiated despite the global economic slowdown, as the energy market requires long-term investment and can offer attractive returns to investors in the long run.

Flagship projects

Chinese parties are already involved in some flagship investment projects in the energy sector. In Republika Srpska (Bosnia-Herzegovina), EFT Group and Dongfang Electric will construct a major new lignite-fired power plant at Stanari. The Chinese Development Bank is providing credit line financing for the construction of the power plant with a project value of €500 million (US$680 million). The Export-Import Bank of China is expected to confirm soon whether it will provide €220 million in lending for the rehabilitation of two units of the Kostolac B thermal power plant and the installation of a flue-gas desulphurization system in Serbia.