A U.S.-led international consortium signed a $4.6 billion contract today to build two nuclear reactors in North Korea, part of a 1994 deal under which the communist country froze its suspected nuclear weapons program. The contract was the final phase of preparations to build the U.S.-designed reactors in Kumho, a rural village in northeastern North Korea.

"Today's event reflects the improving political climate surrounding the Korean Peninsula," said Desaix Anderson, the consortium's executive director, after signing the contract here with Choi Byung Soo, the president of South Korea's state utility company, Korea Electric Power Corp.

The South Korean firm will be the main builder of the reactors and other facilities for the power plants. It has been leveling ground and making other site preparations since 1997, but the main work has been delayed because of funding delays and other problems.

The consortium's three main members--the United States, Japan and South Korea--have recently agreed on funding details. South Korea will assume 70 percent of the cost, or $3.2 billion, with Japan providing $1 billion, the United States $115 million and the European Union $80 million. The balance has yet to be apportioned. The funding will be made through the consortium, called the Korean Peninsula Energy Development Organization.

Under the 1994 accord, the consortium members promised to build the two light-water reactors, each with a rated capacity of 1,000 megawatts. The reactors will replace North Korea's Soviet-designed graphite-moderated reactors, which experts say produce weapons-grade plutonium. U.S. experts said that before freezing its nuclear program, North Korea was suspected of having extracted enough plutonium to make one or two atomic bombs. The North says its nuclear program is for peaceful purposes only.

At a normal pace of construction, the first new reactor would be built by 2007, four years behind schedule. The second reactor would be completed a year later. Under the accord, North Korea is also supposed to receive an annual shipment of 500,000 tons of fuel oil until the first reactor is operational.

The delay--caused by the funding problems and international concern over North Korea's long-range missile development--could complicate future negotiations between the consortium and North Korea on delivery schedules, performance, safety and repayment. "This is an enormously complicated and challenging project," Anderson said.

Negotiations with North Korea on the nuclear reactors began after it threatened to withdraw from the Nuclear Non-Proliferation Treaty in 1993. As part of the deal, North Korea retracted that threat.