Jan. 23 (Bloomberg) — Simpo SIK, a Serbian wood processing unit of furniture maker and retailer Simpo AD, plans a biomass plant with Slovakia’s Grafobal Group Energy.

The two companies signed an agreement yesterday, Ljubomir Ilkic, Simpo’s vice-president, said in a phone interview today. The 5-megawatt, 20 million-euro ($27 million) plant fueled by wood chips will produce steam for Simpo SIK’s presses, electricity and communal heating for Kursumlija, the southern Serbian municipality where the company is based, he said.

Bratislava, Slovakia-based Grafobal would finance the plant for which a binding contract is expected in September, Ilkic said.

To contact the reporter on this story: Misha Savic in Belgrade at msavic2@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net