Government and the African Development Bank (AfDB) have signed a US$55 million (K255 billion) loan facility to support the Itezhi Tezhi hydro-power and transmission line project.
Finance Minister Alexander Chikwanda signed on behalf of the Government while AfDB Resident Representative Freddie Kwesiga signed for his organisation in Lusaka yesterday.
Mr Chikwanda said once the project was completed, it would significantly increase the country's power output which at the moment stood at 1,800 Megawatts (MW).
He said the increase in power generation and distribution would help reduce the erratic supply experienced in many parts of the country.
"The financing of this loan is programmed to support the Itezhi Tezhi hydro-power and transmission line project through the construction and operation of a 120MW hydro-power plant at Itezhi Tezhi along the Kafue River," Mr Chikwanda said.
He said the completion of the project would also contribute to provision of the required energy to complement the fast pace at which the economy was growing.
The minister said the signing had been preceded by a similar one with the European Investment Fund that was also jointly supporting the project.
"It is my sincere hope that the preliminaries necessary to launch the project will be met so that site works can commence in order for the benefits to accrue to the people of Zambia speedily," he added.
AfDB's operations infrastructure, private sector and regional integration vice-president Gilbert Mbesherubusa described the project as a milestone as it would be one of Zambia's first public private partnerships in the energy sector.
Mr Mbesherubusa said it was gratifying to witness the signing at a time when Zambia's power supply system was experiencing a serious power deficit due to increased residential and industrial energy demand.
"Zambia and the southern Africa region continue to experience strong demand for power due to high economic growth principally in the mining and industrial sectors.
"The energy sector investments in Zambia are intended to support national plans and develop its industrial and manufacturing base," he said.
He added: "The 120MW Itezhi Tezhi hydro-power project is one of the most viable energy projects that will be undertaken in Zambia as a joint venture with the TATA Group of India."
It was expected that the project would create an estimated 700 temporary and 120 permanent jobs in the region, and support economic growth and social development in Zambia.