Serbia, Elektroprivreda Srbije (EPS), Srbijagas and Azerbaijan’s SOCAR have completed negotiations on a shareholder agreement for a planned 500 MW gas-fired power plant near Niš, bringing the project closer to establishing a corporate structure for development and construction.
- Shareholder structure and project financing
- Gas generation and system flexibility
- Gas supply and SOCAR’s role
- Carbon costs and the role of flexible generation
- Niš location and cogeneration capacity
- Grid and gas infrastructure
- Financing and bankability
- Investment programme and competing flexibility projects
The agreement is expected to be signed in Belgrade within a month. It would establish a joint venture involving the three companies to develop and construct the facility. The project is being developed with an indicative capacity of approximately 500 MW, combining electricity generation with heat production. Its final technical configuration will depend on feasibility and commercial studies, while Serbian authorities are targeting completion by 2030.
Shareholder structure and project financing
The shareholder agreement is expected to define EPS, Srbijagas and SOCAR’s equity participation, responsibilities, decision-making arrangements and allocation of commercial risks. The parties have not disclosed those details or a definitive investment value. The project has therefore not reached financial close and the shareholder negotiations do not represent an irrevocable construction commitment.
Completion of the negotiations nevertheless establishes a corporate framework through which the project can proceed toward feasibility, engineering, procurement and financing. The plant is being developed as Serbia requires additional flexible generation. Lignite continues to account for the majority of EPS electricity production, while much of the lignite fleet is ageing and the country is preparing additional wind, solar and storage capacity.
Gas generation and system flexibility
A modern combined-cycle gas plant can adjust output more rapidly than large lignite units, allowing it to respond to changes in renewable generation and electricity demand. The proposed Niš facility could reduce production when solar generation is high and increase output when solar production declines, wind generation weakens or electricity demand rises.
Serbia is also developing batteries and the planned Bistrica pumped-storage plant, alongside new wind and solar projects. Batteries can provide short-duration balancing, pumped storage can shift electricity between lower- and higher-price periods, while gas generation can provide dispatchable electricity over longer periods when renewable output is insufficient. The commercial performance of the Niš facility would depend on its operating economics rather than installed capacity alone. Its spark spread would reflect the difference between electricity revenues and the costs of gas and carbon required for generation.
Gas prices therefore represent a key variable. During periods of sharply higher gas prices, gas-fired generation can become significantly more expensive, while competing hydro, solar or nuclear generation may have lower marginal costs in regional markets.
Gas supply and SOCAR’s role
The Energy Ministry has estimated that the plant could require around 600 million cubic metres of natural gas annually once operational. That would represent a significant addition to Serbia’s gas demand and make fuel procurement an important factor in the project’s economics. SOCAR’s involvement follows Serbia’s start of Azerbaijani gas imports after completion of its connection with Bulgaria. Serbia has subsequently increased those volumes, adding Azerbaijani supply alongside Russian gas. The Niš plant would deepen the relationship by making SOCAR an equity participant in a power-generation project that would consume natural gas.
The structure could link fuel supply, project ownership and electricity generation within the same commercial partnership. A long-term gas arrangement could provide greater predictability over fuel availability and costs, while SOCAR’s participation would give it a direct interest in supplying the facility. The project would nevertheless remain exposed to gas-price movements, with the cost of delivered gas directly affecting generation economics.
Carbon costs and the role of flexible generation
Serbia introduced a domestic carbon tax in 2026, initially set at €4 per tonne of CO₂ equivalent, significantly below carbon prices in the EU Emissions Trading System. The domestic charge is not expected in the source assessment to undermine the economics of a modern combined-cycle plant by itself. The longer-term development of carbon pricing is more significant because Serbia is progressively aligning energy and climate legislation with EU rules and remains committed to EU accession.
Gas-fired generation produces substantially less CO₂ per unit of electricity than lignite but remains carbon-intensive compared with low-carbon generation. The Niš plant could therefore function as a transition asset, particularly if operated as flexible rather than permanent baseload capacity. Its revenue model could include electricity sales, balancing services, reserve capacity and periods of higher market prices, rather than relying solely on maximising annual generation.
Niš location and cogeneration capacity
The proposed location near Niš would diversify the geographic distribution of Serbia’s large-scale dispatchable generation and place additional generating capacity closer to industrial demand in southern Serbia. Government officials have linked the project with industrial development in the region.
The facility is also planned with cogeneration capability. Earlier project parameters referred to approximately 150 MW of thermal output, potentially supporting district heating or industrial heat demand. The viability of the thermal component will depend on sufficient nearby heat demand and infrastructure connecting the plant with users, as heat cannot be economically transmitted over the same distances as electricity.
Grid and gas infrastructure
A 500 MW generating unit would represent a substantial injection into Serbia’s transmission system. Elektromreža Srbije (EMS) has therefore participated in project preparation alongside EPS, Srbijagas, the Energy Ministry and the City of Niš. Grid studies will determine the connection configuration, required network reinforcements and the plant’s interaction with other planned generation in the region. Such infrastructure requirements could affect total project costs.
Gas infrastructure is another key requirement. Supplying approximately 600 million cubic metres annually would require sufficient pipeline capacity, pressure and reliability. Serbia has been expanding gas infrastructure and diversification through the Bulgaria interconnector, planned connections toward North Macedonia and Romania, and participation in the expanded Vertical Gas Corridor. The latter could provide greater access to LNG entering Southeast Europe through Greece. These developments would give the proposed plant access to a broader regional gas system, although fuel would still need to be contracted at competitive prices.
Financing and bankability
The shareholder structure is expected to clarify how the project’s principal commercial risks will be distributed. If SOCAR provides equity alongside long-term fuel supply, the project would combine ownership and gas procurement within an integrated partnership. If EPS and Srbijagas carry a larger share of investment while gas is purchased at market-linked prices, the allocation of risk would be different.
No definitive financing package has been announced. Gas-fired power projects have become more difficult to finance through some European development institutions because of climate policies and taxonomy restrictions. Commercial banks can finance modern gas infrastructure, particularly where it replaces more carbon-intensive generation, but financing increasingly depends on assumptions concerning utilisation, transition value and carbon exposure. SOCAR’s participation could provide additional financing options, potentially involving equity, commercial debt, export-credit support or bilateral financing. The project still needs to advance through feasibility studies, design, permitting, grid and gas connections, procurement, financing and construction.
Investment programme and competing flexibility projects
Serbia has established a steering committee, project management structure and specialised technical teams for the project, while the preliminary feasibility study has been undergoing alignment with SOCAR. The project must also be considered alongside other major flexibility investments. EPS is advancing the approximately 660 MW Bistrica pumped-storage project, while Serbia is developing utility-scale batteries and additional renewable generation.
These technologies would perform different functions within the electricity system, although they would also compete for available investment capital. Serbia’s energy sector requires investment measured in billions of euros, making the final project structure, technology, gas-supply arrangements, financing and utilisation assumptions important factors in determining the viability of the Niš plant. The project’s targeted 2030 completion date will require its feasibility, engineering, financing, infrastructure and construction workstreams to advance in parallel.
