The $500m Isimba plant, which is situated 40km downstream from the Bujagali hydro power plant, is expected to take around 34 months to complete.
The project will be funded by the China Export and Import Bank.
Currently, Sinohydro Group is developing a 600MW hydro power plant in the town of Karuma, Uganda, while Cnooc is in the process of developing the giant kingfisher oil field, in the oil-rich Lake Albertine rift basin.
Chinese ambassador to Uganda Zhao Yali said that the country would keep supporting infrastructure development in Uganda to boost its industrialization process.
Ugandan president Yoweri Museveni said, "I thank the government and the people of China for their support in the construction of both Karuma hydro-power station and now this one of Isimba."
