ISLAMABAD, Jan 30 (KUNA) -- A subsidiary loan agreement was signed here on Monday to facilitate legality of loan agreement between Pakistan and Kuwait for the construction of a hydropower project.

The Subsidiary Loan Agreement of USD 40 million was signed between Economic Affairs Division (EAD) and Neelum Jhelum Hydropower Project Company (NJHPC).

The agreement was signed by Abdul Wajid Rana, Secretary EAD, and Lt. Gen. Muhammad Zubair, Chief Executive Officer of NJHPC, said an official press statement.

The Neelum Jhelum Hydropower Project is located at Muzaffarabad district of Azad Jammu Kashmir (AJK). Upon its completion it will generate approximately 1,000 MW of electricity. Kuwait Fund for Arab Economic Development (KFAED) is one of the donors of this project; the other donors being the UAE, Exim Bank China and Saudi Fund for Development.

A Loan Agreement amounting to USD 40 million was signed between Government of Pakistan and KFAED on November 25, 2010 for the purpose of construction of NJHPC. Signing a subsequently Subsidiary Loan Agreement between Economic Affairs Division on behalf of Government of Pakistan and NJHPC was a legal requirement to make the Loan Agreement effective.

This project aims at developing the National Power Generation System to meet the increasing electricity demand in the country and indigenous renewable energy resources, namely the hydro resources.