Kuwait has signed a $2.65 billion contract with General Electric Co and Hyundai Heavy Industries to build and operate a power plant in the north of the country, General Electric said.

The Subbiya power plant, expected to come on line in the summer of 2011, will have a capacity of 2,000 megawatts, the largest U.S. conglomerate said in a statement on Monday.

It is an important step in our plans to boost power capacity to meet continuing demand, which is projected to grow at about 8 percent a year, GE quoted Kuwait's minister of Electricity and Water Badr al-Shuraian as saying.

GE, which will supply equipment and services, has a $1.3 billion share in the contract, the statement said.

The world's largest maker of electricity-producing turbines has focused on the Middle East as a key growth market for its heavy equipment used in infrastructure projects. It has landed $9 billion in orders from the region over the last 16 months, with big orders coming in Iraq and Saudi Arabia, said Steve Bolze, chief executive of GE's power and water arm.

We see the Middle East really as an ongoing growth area, Bolze said. It's a region that continually needs power.

The Fairfield, Connecticut-based company will supply Kuwait six gas turbines and three steam turbines.

Hyundai will carry out the engineering, procurement and construction of the plant, it added.

The plant will come on line in two stages, the first in 2011 and generating 1,300 megawatts, and the second in 2012 generating 700 megawatts, it added.

Last month, Kuwait chose GE to build the Subbiya plant after it had the lowest bid for about 760 million dinars ($2.65 billion).

GE beat other pre-qualified firms for the projects such as Germany's Siemens, Japan's Mitsui & Co and Marubeni Corp, Spain's Iberdrola, and Canada's SNC-Lavalin Limited.

In April, Kuwait issued a new tender to build turbines for the plant in the north of the country, saying it expected the cost to be far less than earlier estimates in excess of 700 million dinars.

Peak demand strains the capacity of the power grid in the desert state, where air-conditioning is widely used.

Kuwait, with one of the world's highest per capita power consumption rates, has said it plans to boost power capacity to around 16,000 megawatts from 10,000 MW by 2012.

($1=.2865 Kuwaiti Dinar)

(Reporting by Eman Goma, additional reporting by Scott Malone in Boston; Editing by Clarence Fernandez and Anthony Barker)