* More investment in renewables expected
* Chinese see the Balkans as a bridge to EU market
* For a FACTBOX []
By Ivana Sekularac
BELGRADE, July 12 (Reuters) - Faced with dwindling interest
from cash-strapped and cautious European investors, the Balkans'
creaking electricity infrastructure is happily soaking up more
money from China.
Chinese investors are increasingly targeting energy projects
in the Balkans, stepping up their presence and showing a
willingness to take bigger risks than European rivals on a
potentially lucrative market with links to the EU.
"It is important to say that Chinese companies...are able to
finance the project on very favourable terms," Serbia's Energy
Minister Petar Skundric told Reuters.
"Apart from thermal plants, Chinese companies are interested
in hydro plants, but also in investing in gas and oil sector
here and they are especially interested in renewable energy and
construction of wind farms."
Big European Union companies including Austria's Verbund
<VERB.VI> and EVN <EVNV.VI> and Czech CEZ <> have
already invested in the region.
But with many European investors wary or unable to provide
further funding due to the global financial downturn, Balkan
governments see China as a solution.
"Considering the fact that the cash flow from EU countries
is reduced, we are going to see more investors coming from
China," said Hrvoje Stojic a Zagreb-based analyst with Hypo-Alpe
Adria bank.
Chinese companies have both the finances and the willingness
to take on greater risk in chase of potentially higher returns
in the Balkans, Stojic said. It also offers another toe-hold
into EU markets, he added.
"The energy sector is especially interesting because it has
a potential for growth," he said in a telephone interview.
"There has been very little investment, markets are not
fully liberalised and the prices are among the lowest in Europe.
The consumption will definitely grow and there is a space for
making money."
As a part of their path to the European Union, Balkan states
have made commitments to liberalise their energy sectors by 2015
and pledged to achieve EU standards in power production by that
time.
This will require plenty of investment to upgrade an ageing
energy infrastructure that has seen little investment in decades
due to Balkan wars during the 1990s and which is largely made up
of polluting coal-fired plants.
"The companies from the EU are reluctant to invest because of
the poor business climate," said Ljubodrag Savic, professor at
Belgrade's Economics Faculty.
"Complicated administrative procedures, frequent changes of
laws and uncertainty about future tax system drive many
investors away."
SERBIA LINK
Britain's Energy Financing Team was the first to seek a
partner among Chinese companies and signed a $415 million deal
with Dongfang Electric Corp <600875.SS> to build and equip its
300 megawatt coal-fired plant Stanari in Bosnia.
Serbia, which opened its doors to Chinese immigrants and
goods during its international isolation during the Balkan wars
of the 1990s, has seen substantial Chinese investment in recent
months and top government officials expect even more.
In February, it agreed the financing terms for $1.25 billion
project to upgrade two blocs in Kostolac power plant with
Chinese government.
Chinese companies expressed interest in projects in EU
member Romania, offering to enter in a partnership for
construction of coal-fired power plant.
In neighbouring Bulgaria, two Chinese companies Polar
Photovoltaics and Wiscom plan to build 2 megawatt solar power
plant.
Stephen Butler of KPMG said he expectED Chinese wind
developers and solar panel makers to boost investment in the
Western Balkans over the next few years.
"Chinese firms are now looking to compete with European and
American firms at the global level, so investment opportunities
in the region provide them with the chance to diversify their
portfolios and build out their global presence," he said.
(Reporting by Ivana Sekularac. Additional reporting by Luiza
Ilie in Bucharest, Tsvetelia Tsolova in Sofia and Benet Koleka
in Tirana. Editing by Michael Kahn and William Hardy)
