Tonga's sole power company, Shoreline, says its potential sale to a New Zealand power company will encourage foreign investment there.
The Chief Executive of Shoreline, Soane Ramanlal, says since it took over in 1988, it has made significant improvements to the electricity generation in the kingdom.
Mr Ramanlal says the sale is a first for foreign investment, and he believes the New Zealand company's expertise will further develop Tonga's power supply.
"Northpower has invested a lot of capital, time and personnel in doing due diligence in this transaction and they've signed off on it. So for Tonga and the people of Tonga its a signal to the foreign investment community that Tonga is open for business."
Mr Ramanlal says he expects the sale agreement to be finalised by the end of November.
Northpower is expected to be operating Tonga's electricity generation by early next year.