China-based Sepco III Electric Power Construction will build a 390MW gas-fired power plant in the central Bosnian town.
Sepco III was selected after it offered the best price of EUR218m ($284.44m) to carry out the project, while other bidders included two German, one Italian and one Spanish firm, reported Reuters.
As part of the deal, General Electric will supply gas turbines for the future plant.
Bosnia receives 40% of its electricity from hydropower plants and the rest from coal-fired plants.
KTG CEO Branko Montenegro said that Chinese partner has indicated that it may take a stake in the future plant that will also produce steam to heat the town.