China Machinery Engineering Corporation (CMEC) is threatening Serbia with a potential fine of up to $795 million due to delays in the construction of the Kostolac B3 TPP. CMEC claims that the delays, which exceeded the four-year deadline, are due to faults with the Electric Power Industry of Serbia (EPS), not the Chinese company. If CMEC pursues international arbitration, EPS and the Serbian government are prepared to counterclaim for compensation, citing the costs incurred from importing electricity due to the plant’s late completion.
The construction of the 350-megawatt block was originally scheduled to be completed by the end of 2019, but delays pushed the timeline to 2023. CMEC argues that inflation, the COVID-19 pandemic, and the war in Ukraine led to increased costs, estimating a total compensation claim of $795 million, with $390 million due to inflation and $405 million due to changes in the scope of work by EPS.
Serbia, however, counters that CMEC’s delays and mismanagement were the primary factors, noting that the Stanari power plant in Republika Srpska, with similar capacity, was completed in half the time. Serbia is preparing its own compensation claim, ranging from €300 million for energy losses during the crisis to a higher amount if additional delays are considered.
