The project is called Xelanong 2 and is foreseen to generate 35 megawatts of power, or 140,700 megawatts of electricity annually.
The Chinese company is the one which built the giant Gezhouba Dam in the Yangtze River which produces 2,715 megawatts of power.
In the statement, Gezhouba said that Xelanong 2 will be located at one of the tributaries of the Mekong River. The hydropower station with the dam has a height of 55 meters.
Construction will take 41 months and the total cost is $7.86 million. It will be a build-operate-transfer (BOT) project.
Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, said that the hydropower plant will bring significant benefits to the Lao economy.
He added, "There is market demand and expertise in technology and operation is ripe, but there are potential risks in terms of relocation and environmental issues."
The construction of the power plant will also give way to the launch of other projects, especially the planned Chinese-Laos railway.
When Lao President Bounnhang Vorachit visited Beijing in May, the Chinese government expressed intentions of investing in the country's energy sector.
Vorachit welcomed the initiative and said that they welcome Chinese investments and their cooperation will help bring electricity to 98 percent of the country by 2020.
To reach this target, the Lao government intends to build power plants with installed capacity of 3.5 million kilowatts in operation and generating 30 million megawatt-hours of electricity every year.
There are already five hydropower plants in Laos that have been built by Chinese companies since 1998 to 2014 in the Mekong River. The river has a huge potential for hydroelectric power as it can produce as much as 30,000 megawatts.
Because of the immense potential of the Mekong River, Laos is considered as the "battery of Southeast Asia."