A $37million (£24m) loan from a London-based bank will be used to build a transmission link to connect Albanian and Macedonian energy markets to the EU.
The European Bank for Reconstruction and Development (EBRD) will provide the loan to the Macedonian electricity transmission system operator (MEPSO).
MEPSO is responsible for electricity transmission and power control in the country.
The firm will build the 400kV transmission link from the south-western Macedonian city Bitola to the Albanian border and install a substation at Ohrid.
Holger Muent, EBRD Director for the Western Balkans said: “The construction of the new line will connect the Macedonian electricity market, which is dominated by thermal power, to the Albanian electricity market, where hydropower prevails.
“This will improve the balancing of the two electricity systems, reduce operational costs and boost the use of renewable energy.”
The EBRD began investing in the Macedonian economy in 1993. It has signed more than 90 projects in the country with a total of more than €1.5 billion (£0.9bn).