Cambodian Prime Minister Hun Sen on Monday defended controversial Chinese-funded hydro-electric dams as he opened the energy-starved country's largest-ever power plant, despite warnings from activists of environmental costs.

China Huadian Corporation has invested nearly $500 million to build the 338-megawatt dam in Stung Russey Chrum Krom, a protected forest area in the southwestern province of Koh Kong.

At the plant inauguration the premier justified his government's decision to use dams to bring power to the country, where only around a quarter of households have access to reliable electricity.

"This dam affects some forest, but if we take the economic benefits into consideration, we are solving more problems than we are causing to the environment," Hun Sen said in a speech broadcast on national radio.

Cambodia has come in for sharp criticism for allowing companies to clear hundreds of thousands of hectares of forest -- including in protected zones -- for everything from rubber and sugar cane plantations to hydropower dams.

Another Chinese-funded 246-megawatt dam -- the $540 million Stung Tatay project also in Koh Kong -- is set to open later this year.

Environmental groups say the government has failed to scrutinise the environmental implications of both dams, located in the country's protected southwestern Cardamom Forest.

About 1,600 hectares (4,000 acres) of woodland will be flooded or cleared to make way for both dams, the government has previously said.

This could destroy key animal habitats and upset the delicate local eco-system, according to activists.

On Monday Hun Sen said Cambodia expected to open another Chinese-funded 400-megawatt hydroelectric dam in 2018 on a tributary of the Mekong River in the northern province of Stung Treng.

High utility prices, driven by the lack of supply, are a major obstacle in Cambodia's efforts to attract foreign investment, and the government has struggled to find a way to cut the cost of power.

Nine dams, including several funded by China, are set to open by 2019. Once they are operational the government has said they will generate 2,045 megawatts of power, serving all of Cambodia's provinces.