The Honduran government and Chinese company Sinohydro have signed an agreement to begin construction next year of three dams on the Patuca river to generate electricity up to 524 MW.

The Honduran president's office did not indicate the cost of the dams but said that Sinohydro will fund the project with loans from Chinese financial institutions.

It said the three hydroelectric dams, one of the Central American country's longest and most voluminous, will have a combined electricity generation capacity of 524 MW.

The Patuca river runs for some 500 km through Olancho and Gracias a Dios provinces, which border Nicaragua, before flowing into the Caribbean Sea.

The document was signed by Honduran Finance Minister William Chong Wong and Sinohydro Vice President Son Dong Sheng in a ceremony attended by Honduran President Porfirio Lobo and other officials.

'I'm determined to promote these types of projects and make Honduras more open to all foreign investors who come and commit to our development,' Lobo said in a statement.

Honduras currently has the capacity to produce 1,400 MW, around 60 percent of which comes from thermoelectric sources, according to the state-owned ENEE electric utility.

The country's largest hydroelectric power station is the 300 MW El Cajon, which has been in operation for the past 25 years and is the largest in Central America.