A Chinese industrial conglomerate is to invest $1bn in a pumped-storage system in southwest Cambodia.

According to news site Yicai, the Upper Tatai Pumped Storage Power will be added to the 150MW Tatai hydropower scheme, which China National Machinery Industry Corporation (Sinomach) hopes to complete next year.

The storage project will use excess electricity from the hydropower project to pump water between two reservoirs located 3km upstream from the dam. This will then be used to operate four 250MW turbines, giving a maximum generating capacity of 1GW.

The electricity will be used to smooth inputs to the Cambodian grid, particularly from intermittent generators such as wind and solar.

China Heavy Machinery, a Sinomach subsidiary, will take the lead in building and operating the station.

The state-owned firm, which is based in Sichuan province, has signed a build, operate and transfer agreement with Cambodia’s Ministry of Mines and Energy, as well as state-run utility Electricité du Cambodge.

Under the agreement, Sinomach will not pay rent on the land it uses, and will have fixed fees over the 40 years of its concession.

China Heavy Machinery will invest $251m of its own funds in the project, with the remainder coming from bank loans. The rate of return on investment is projected to above 8%.