The company which is the largest Kosovo's exporter was bought by Albania's Balfin Group last year in what was seen as a rescue deal aimed to restore production which was halted when the heavily indebted company ran into financial difficulties.

Ferronikeli has changed hands several times since it was privatised in 2005 and now it employs 800 workers and a further 1,000 contractors.

"The EBRD finance will help reduce energy costs and improve the quality of production, which should enable Ferronikeli to become a competitive exporter," Eric Rasmussen, EBRD Director, for Natural Resources said in a statement.

Kosovo, with 1.8 million people, remains one of the poorest in Europe where one-third of its workforce is unemployed.

Non-governmental organisations and state agencies have in the past years told the nickel factory to reduce pollution.

EBRD said the investment in higher environmental standards and energy efficiency will lower the company's greenhouse gas emissions by an expected 38,615 tonnes of CO2 per year.

The lender said it has invested 395 million euros (364.2 million pounds) in Kosovo since 2012.

(Reporting by Fatos Bytyci; editing by David Evans)