Bosnia's Serb Republic and neighbouring Croatia agreed on Friday to jointly build a 300 megawatt hydro power plant on Bosnia's Trebisnjica river in the south near the Croatian Adriatic city of Dubrovnik.
Croatia is hoping to reduce its dependence on energy imports, while Bosnia is the sole energy exporter in the Western Balkans, due in part to its plentiful hydro potential.
The prime minister of Bosnia's autonomous Serb Republic, Aleksandar Dzombic, said the cost of the project – 180 million euros ($219.31 million) – would be split equally between the region's power utility EPRS and Croatia's utility HEP.
It will be the second joint hydro project between the two former Yugoslav republics.
Dzombic said construction would start next year and be completed in 2016, when the Dubrovnik 2 power plant will be connected to the grid.
Croatian Deputy Prime Minister Radimir Cacic said they would agree later on how the energy produced by the plant would be shared.
Croatia, due to join the European Union on July 1, 2013, imports up to 30 percent of its electricity consumption at a cost of 400 million euros per year.
Its state power board HEP plans to invest 19.1 billion kuna ($3.2 billion) in production, transmission and distribution facilities by 2016 and may issue bonds abroad to raise some of the funds..
New investment is needed in power plants and grids across the region after the energy sector fell into disrepair during the Balkan wars of the 1990s.
