The funds will be used in a project involving the development of a back-to-back station at Ayrum in Armenia, near Georgian border, and a power transmission line from the station to Georgia.
The developments are expected to strengthen energy trade between the two Eurasian countries and provide them with enhanced access to power markets.
The project is also being funded by KfW Bankengruppe on behalf of Germany and EU Neighbourhood Investment Facility (NIF). Lead financier KfW Bankengruppe is offering a €85.2m in loan, while the NIF grant is for €10m.
Armenia and Georgia are spending €1.5m and €6.6m, respectively.
KfW director for Eastern Europe, Caucasus and Central Asia Eva Witt said: "The connection of the Armenian and Georgian power grids aims at closing a missing link in the regional power network and will contribute to improving energy security in particular in Armenia."
Armenia Finance Minister Gagik Khachatryan said: "We hope that our joint efforts on this project will serve its goal of ensuring a reliable energy system."
EIB vice president Wilhelm Molterer said: "Secure and reliable supplies of energy are of crucial importance for further improving the living standards of the people of Armenia and Georgia."
"The project will also foster regional trade, increase the potential for the use of hydro energy generation and facilitate FDI by ensuring the reliable electricity deliveries needed by foreign investors."
