The agreement comes despite the nation being embroiled in a political crisis which saw its prime minister Mari Alkatiri step down last month. An interim premier to head government until elections next year is yet to be appointed.
"I am extremely pleased that, despite the upheaval of the last couple of months, international investors continue to show faith in the future of Timor-Leste," Jose Ramos-Horta, who is tipped as a contender for the interim position, was quoted by AFP as saying in a statement.
Ramos-Horta, who resigned his posts as foreign and defence minister a day before Alkatiri stepped down in protest over the crisis, said the investment was East Timor's biggest yet aside from its major gas development projects.
The Nobel laureate is continuing in the positions however until a successor is appointed.
The half-island nation has rich gas reserves which have already earned it millions of dollars in revenue.
The project will be run by Energy Generating Enterprise Timor-Leste, a joint venture between the East Timorese government, which will contribute 10 percent of capital, and Thai and British private investors.
It will initially generate about 10 megawatts of power at a cost of almost half the prevailing price, Praphad Phodhivorakhun, president of Thai company KYTBW, said according to the statement.
East Timor's infrastructure was largely obliterated by the Indonesian military and the militias they supported when the tiny nation voted for independence from Indonesia in 1999.
Unrest again rocked the country in May this year when 21 people were killed and some 150,000 people fled their homes amid battles between rival factions of the military and police as well as violent gangs roaming the streets.