Ethiopia signed a contract Friday worth nearly $1 billion with a Chinese energy company to build two transmission lines linking the country's largest dam to the country's central power grid.

The Ethiopian Electric Power Corporation (EEPCo.) signed the deal with China Electric Power Equipment and Technology Company (CET) in the Ethiopian capital.

The three-year project, which will be fully funded by the Export-Import Bank of China, will start immediately.

EEPCo.'s CEO said the deal was a major step for Ethiopia's energy sector.

"This is another milestone in (realising) Ethiopia's development objective," Miheret Debebe told reporters.

The two transmission lines, with a combined capacity of nearly 1000 kilovolts, will run over 700 kilometres to link the Grand Renaissance Dam to the main power grid near the country's capital Addis Ababa.

Miheret urged CET to adhere to the timeline set out in the contract for the project's completion, and admitted that securing funding for the large-scale project was a "challenge."

As part of its ambitious Growth and Transformation Plan (GTP), Ethiopia is developing its energy production sector with the aim of exporting power to neighbouring countries.

With a capacity of 6,000 MW, the Renaissance Dam on the Nile River is the largest of Ethiopia's dams, most of which are still under construction.

Hydropower is set to be the largest energy provider, but wind, geothermal and solar projects are also underway.

The country has the capacity to produce 45,000 MW of power, more than the total amount currently consumed in all of sub-Saharan Africa, according to official figures.

The GTP seeks to boost economic growth in order to transform Ethiopia into a carbon-neutral, middle income country by 2025.

China is a major player in the Horn of Africa nation, heavily invested in manufacturing, energy, and transport industries.