The European Bank for Reconstruction and Development will provide a €65m loan for the construction of the Boskov Most hydro power plant in Macedonia.
The new plant will be built near the town of Debar in the western part of the country and will have a generating capacity of 70MW.
Financing will be extended to the state-owned electricity generation company AD Elektrani na Makedonija.
The purpose of the plant is to support Macedonia's drive to improve the security and quality of its energy supplies, as well as promoting renewable sources of energy generation.
Once operating, the plant will enable the nation to reduce electricity imports, in addition to cutting the country's annual CO2 output by an estimated 95,000 tonnes.