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UPDATE 1-World Bank won't back Kosovo coal power plant project

(Adds Kosovo government’s reaction)

PRISTINA, Oct 10 (Reuters) - The World Bank said on Wednesday it would not support a planned 500-megawatt (MW) power plant in Kosovo, the Balkan country’s first major energy project in more than two decades, because it would use coal rather than cheaper renewable fuels.

Kosovo’s government had asked the Washington-based lender to provide partial risk guarantees to help unlock cheaper loans for the project.

World Bank President Jim Yong Kim said the lender had made “a very firm decision” not to back the project, when asked by a Kosavar civil society representative at a meeting of the bank and International Monetary Fund in Bali.

In comments broadcast on the bank’s website, he said the institution’s rules required that it “go with the lowest cost option, and renewables have now come below the cost of coal ... so without question we are not going to do that.”

It is unclear how the government will now proceed with the project, which environmentalists say could lock Kosovo into a future powered by lignite – the dirtiest form of coal.

Kosovo signed a deal in 2017 with London-listed power generator ContourGlobal to build the plant at a cost of around 1 billion euros ($1.15 billion).

Kosovo Economy Minister Valdin Lluka said his government would work with ContourGlobal to finish the project in time, adding that the company was on track to secure financing from international financial institutions.

“I will not allow Kosovo to depend on energy imports because we have tremendous potential to generate electricity not only for our needs but also for export,” Lluka wrote on Facebook.

Despite having around 14 billion tonnes of proven lignite reserves, the fifth largest in the world, Kosovo is struggling with power shortages and the new plant was designed to help it meet around half of the country’s power demand.

Nearly all electricity in Kosovo is produced in two ailing coal-fired plants. Some experts say the plants are the worst polluters in Europe.

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