The project will have a domestic finance component of 15 percent amounting to 544.1 million rupees. The loan will be repayable in 15 years with 3-years grace.
Sri Lanka's government has a goal of providing 100 percent electricity to the island.
Information ministry Keheliya Rambukwelle said the Exim Bank of China will give 33.3 million dollars for the project on a long term loan.
The project involves 106 new low voltage substations and rehabilitation of 200 substations and building 802 kilometres of low voltage distribution lines.
The material supply has been awarded to Shanghai Electric Power Transmission & Distribution Engineering Co Ltd.