In addition, the government of China and China’s Export-Import (Exim) Bank will allot funds totaling about $570m through a bilateral agreement.

Exim’s contribution would be $500m.

Uganda Junior Energy Minister Simon D’Ujanga told Reuters that the funds provided by China would be on concessional terms.

"We’re looking for cheap money to develop our infrastructure projects and China has that money," added D’Ujanga.

The work on the project is likely to commence in August 2013, with production scheduled to begin in 2016.

The Isimba hydro project will become the fourth largest in Uganda, after the 250MW Bujagali power project, the 600MW Karuma dam and the 600MW Ayago power station.