UPDATE 1-Montenegro's EPCG scraps deal with Skoda Praha for a new power plant

(Adds background to the deal, future plans for plant, opposition)

SARAJEVO, Dec 28 (Reuters) - Montenegro’s power utility EPCG has ended a deal with Skoda Praha, a unit of Czech power firm CEZ, for the construction of a new coal-fired power plant due to Skoda Praha’s failure to secure funding, EPCG said on Thursday.

Skoda Praha signed a deal last year with EPCG to add a new 254 megawatt (MW) unit at the Pljevlja power plant in Montenegro at an estimated cost of 324.5 million euros ($387 million).

“We have been waiting for Skoda Praha to secure the project funding for more than a year. As there was no solution we have informed it that we are terminating the cooperation,” EPCG spokesman Rajko Sebek told Reuters.

The Czech contractor failed to secure financing from the state-owned Czech Export Bank (CEB) and the Czech state export credit insurance provider EGAP last year and had sought alternative funding.

Sebek said that EPCG will now completely overhaul the existing 210 MW ageing unit at Pljevlja to avoid its closure, boost output, and trim greenhouse gas emissions in line with standards of the European Union which Montenegro aims to join.

The project, that will cost 40 million euros, is set to be completed within three years, he said, adding that EPCG would continue to seek a way to add a new unit to the Pljevlja plant.

Montenegro, like other Balkan countries, faces an acute need for new power sources after decades of under-investment. The new unit was a huge project for the small Adriatic nation, and would have accounted for about 8 percent of its national output.

Environmentalists have long opposed the plant and say energy efficiencies and solar potential have hardly been tapped.

EPCG, operates around 870 MW of installed capacity. It is jointly managed by the government and Italy’s biggest regional utility A2A, which hold a 58.3 percent stake and 41.7 percent stake in the company, respectively.

A2A had said it planned to sell its entire stake in EPCG for 250 million euros. It also opposed plans for adding the new unit at Pljevlja.

Reporting by Maja Zuvela in Sarajevo; Editing by Elaine Hardcastle