The Nordic Investment Bank (NIB) has signed a 15-year loan agreement with the Greenland Self-Rule Government, under which NIB will lend $59m for the construction of a new hydropower plant in Greenland.

Currently under construction on west coast of Greenland the plant has an installed capacity of 22.5MW and will harness water discharge from the two natural glacial lakes in the region.

NIB President and CEO Henrik Normann said that the project is set to increase Greenland’s power generation from renewable sources.

"This project is of high importance for Greenland as the island is reducing its dependence on energy production from fossil fuels," Normann added.

The hydropower project includes the building of a 5.5km tunnel that channelizes water to three 7.5MW turbines in an underground power station.

Expected to be fully operational in September of 2013, the project will see the first turbine commissioned in November 2012.