The contract, valued at 1.3 billion euros ($1.54 billion), should be completed by 2023 and will have a life expectancy of four decades.
Kosovo has more than 14 billion tonnes of proven lignite reserves, the fifth largest in the world. More than 90 percent of its power is produced in two ailing coal-fired plants Kosova A and Kosova B which are seen as the worst polluters in Europe.
Construction will start late next year or early 2019.
“This is the biggest project since the war ended and this plant will end the dependence on energy imports,” Minister of Development Valdrin Lluka said after the signing ceremony.
Lluka said the project will help Kosovo’s economic growth rise to 5 or 6 percent in the coming years, up from around 4 percent in 2017.
The project will employ around 10,000 people during the construction phase and 500 workers once operational.
“I don’t see any difficulty to finance the project. We have thermal plants and coal plants being build in the region and we don’t see the capital as a problem,” said Joseph Brand, CEO of ContourGlobal.
Despite its lignite riches, Kosovo still faces power shortages as a result of corruption and a lack of investment.
Western Balkan countries, including Bosnia, Kosovo, Montenegro and Serbia, plan to invest billions of euros in building new coal-fired plants to meet rising demand for electricity as old plants are phased out.
But environmentalists fear the investment in coal could backfire as governments may be forced to spend hundreds of millions of euros more to upgrade plants to meet EU environmental standards as the countries progress towards membership of the bloc.