Abu Dhabi’s state-owned Mubadala Development Company has signed an agreement with the Malysian government’s development body 1Malaysia Development Berhad (1MDB), that could result in the two partnering on the development of a $7bn aluminum smelter in Malaysia.

Mubadala Real Estate and Hospitality (MREH) and Mubadala Industry (MI) signed two agreements with 1MDB on 8 October.

Mubadala said, “MI has agreed to assess the viability of an investment of up to $7bn for the development of a major initiative in the aluminium sector based on hydro power.”

Preliminary assessment work on the project is now starting.

Mubadala said the deal involves the potential joint development of key strategic projects within the Kuala Lumpur International Financial District (KLIFD), a 34.4 hectare development in the Malaysian capital Kuala Lumpur that is being led by 1MDB.

The full scope of MREH’s participation in projects to be located within the KLIFD will be finalised in 2011, following completion by 1MDB of the KLIFD masterplan.