KATHMANDU, Nepal (AP) — A government agency on Thursday signed an agreement with an Indian company to build the 400-kV New Butwal Substation in Lumbini Province, which will improve Nepal's transmission capacity.

Millennium Challenge Account-Nepal (MCA-Nepal), the body responsible for managing the infrastructure programme, entered into an agreement with Linxon India Private Limited for the construction of New Butwal Substation in Nawalparasi district of the province.

The agency said the signing ceremony took place in Bhumahi, Nawalparasi and was attended by Nepal Electricity Authority Managing Director Kulman Ghisingh and US Ambassador to Nepal Dean R Thompson, among others.

According to Nepal Electricity Authority spokesperson Chandan Kuma Ghosh, the 400 kV gas insulated switchgear (GIS) cross-border substation will be constructed within the contract period of 39 months.

Thompson reiterated the US government's commitment to collaborating with NEPA to meet its energy needs. He underlined the important role of 400 KV Northeast Butwal Substation in promoting cross-border energy trade and economic growth of Nepal.

“The 400 kV New Butwal Substation will improve Nepal’s transmission capacity, contributing to reliable and affordable electricity for domestic consumption, expanded commercial and industrial enterprises and cross-border electricity trade,” Thompson said.

"The 400 KV substation has been a priority for NEA and will complement the existing 220 KV substation to enhance cross-border energy trade in the region," NEA Managing Director Ghisingh said.

The New Butwal Substation is part of a US$500 million electricity transmission project funded by the US government's Millennium Challenge Corporation (MCC) and the Government of Nepal to improve Nepal's energy infrastructure.