diff --git a/contracts/src/DeployScript.sol b/contracts/src/DeployScript.sol
index 77fb75e460..085b4468ac 100644
--- a/contracts/src/DeployScript.sol
+++ b/contracts/src/DeployScript.sol
@@ -16,6 +16,7 @@ import {ChannelID, ParaID, OperatingMode} from "./Types.sol";
 import {SafeNativeTransfer} from "./utils/SafeTransfer.sol";
 import {stdJson} from "forge-std/StdJson.sol";
 import {UD60x18, ud60x18} from "prb/math/src/UD60x18.sol";
+import {HelloWorld} from "../test/mocks/HelloWorld.sol";
 
 contract DeployScript is Script {
     using SafeNativeTransfer for address payable;
@@ -99,6 +100,7 @@ contract DeployScript is Script {
         payable(assetHubAgent).safeNativeTransfer(initialDeposit);
 
         new GatewayUpgradeMock();
+        new HelloWorld();
 
         vm.stopBroadcast();
     }
diff --git a/contracts/src/FundAgent.sol b/contracts/src/FundAgent.sol
index 95192299c0..b6b75b4dc4 100644
--- a/contracts/src/FundAgent.sol
+++ b/contracts/src/FundAgent.sol
@@ -32,12 +32,15 @@ contract FundAgent is Script {
 
         bytes32 bridgeHubAgentID = vm.envBytes32("BRIDGE_HUB_AGENT_ID");
         bytes32 assetHubAgentID = vm.envBytes32("ASSET_HUB_AGENT_ID");
+        bytes32 penpalAgentID = vm.envBytes32("PENPAL_AGENT_ID");
 
         address bridgeHubAgent = IGateway(gatewayAddress).agentOf(bridgeHubAgentID);
         address assetHubAgent = IGateway(gatewayAddress).agentOf(assetHubAgentID);
+        address penpalAgent = IGateway(gatewayAddress).agentOf(penpalAgentID);
 
         payable(bridgeHubAgent).safeNativeTransfer(initialDeposit);
         payable(assetHubAgent).safeNativeTransfer(initialDeposit);
+        payable(penpalAgent).safeNativeTransfer(initialDeposit);
 
         vm.stopBroadcast();
     }
diff --git a/smoketest/make-bindings.sh b/smoketest/make-bindings.sh
index b6fb1cf0d4..a6a320a58a 100755
--- a/smoketest/make-bindings.sh
+++ b/smoketest/make-bindings.sh
@@ -6,7 +6,7 @@ mkdir -p src/contracts
 
 # Generate Rust bindings for contracts
 forge bind --module --overwrite \
-    --select 'IGateway|WETH9|GatewayUpgradeMock' \
+    --select 'IGateway|WETH9|GatewayUpgradeMock|HelloWorld' \
     --bindings-path src/contracts \
     --root ../contracts
 
diff --git a/smoketest/tests/transact_from_penpal_to_ethereum.rs b/smoketest/tests/transact_from_penpal_to_ethereum.rs
new file mode 100644
index 0000000000..5638807cc7
--- /dev/null
+++ b/smoketest/tests/transact_from_penpal_to_ethereum.rs
@@ -0,0 +1,83 @@
+use ethers::{
+	abi::{Abi, Token},
+	prelude::{Address, Middleware, Provider, Ws},
+};
+use futures::StreamExt;
+use hex_literal::hex;
+use snowbridge_smoketest::{
+	contracts::hello_world::{HelloWorld, SaidHelloFilter},
+	helper::*,
+	parachains::penpal::api as PenpalApi,
+};
+use std::{ops::Deref, sync::Arc};
+use subxt::{
+	ext::sp_core::{sr25519::Pair, Pair as PairT},
+	tx::PairSigner,
+};
+
+const HELLO_WORLD_CONTRACT: [u8; 20] = hex!("EE9170ABFbf9421Ad6DD07F6BDec9D89F2B581E0");
+
+#[tokio::test]
+async fn transact_from_penpal_to_ethereum() {
+	let test_clients = initial_clients().await.expect("initialize clients");
+
+	let ethereum_client = *(test_clients.ethereum_client.clone());
+	let penpal_client = *(test_clients.penpal_client.clone());
+
+	let hello_world = HelloWorld::new(HELLO_WORLD_CONTRACT, ethereum_client.clone());
+	let contract_abi: Abi = hello_world.abi().clone();
+	let function = contract_abi.function("sayHello").unwrap();
+	let encoded_data =
+		function.encode_input(&[Token::String("Hello, Clara!".to_string())]).unwrap();
+
+	println!("data is {}", hex::encode(encoded_data.clone()));
+
+	let extrinsic_call = PenpalApi::transact_helper::calls::TransactionApi.transact_to_ethereum(
+		HELLO_WORLD_CONTRACT.into(),
+		encoded_data,
+		4_000_000_000,
+		80_000,
+	);
+
+	let owner: Pair = Pair::from_string("//Bob", None).expect("cannot create keypair");
+	let signer: PairSigner<PenpalConfig, _> = PairSigner::new(owner);
+
+	let _ = penpal_client
+		.tx()
+		.sign_and_submit_then_watch_default(&extrinsic_call, &signer)
+		.await
+		.expect("send through xcm call.");
+
+	wait_for_arbitrary_transact_event(&test_clients.ethereum_client, HELLO_WORLD_CONTRACT).await;
+}
+
+pub async fn wait_for_arbitrary_transact_event(
+	ethereum_client: &Box<Arc<Provider<Ws>>>,
+	contract_address: [u8; 20],
+) {
+	let addr: Address = contract_address.into();
+	let contract = HelloWorld::new(addr, (*ethereum_client).deref().clone());
+
+	let wait_for_blocks = 300;
+	let mut stream = ethereum_client.subscribe_blocks().await.unwrap().take(wait_for_blocks);
+
+	let mut ethereum_event_found = false;
+	while let Some(block) = stream.next().await {
+		if let Ok(events) = contract
+			.event::<SaidHelloFilter>()
+			.at_block_hash(block.hash.unwrap())
+			.query()
+			.await
+		{
+			for _ in events {
+				println!("Event found at ethereum block {:?}", block.number.unwrap());
+				ethereum_event_found = true;
+				break
+			}
+		}
+		if ethereum_event_found {
+			break
+		}
+	}
+	assert!(ethereum_event_found);
+}
diff --git a/web/packages/test/scripts/set-env.sh b/web/packages/test/scripts/set-env.sh
index 2291d2b6eb..f85d94374b 100755
--- a/web/packages/test/scripts/set-env.sh
+++ b/web/packages/test/scripts/set-env.sh
@@ -44,9 +44,11 @@ assethub_ws_url="${ASSET_HUB_WS_URL:-ws://127.0.0.1:12144}"
 assethub_seed="${ASSET_HUB_SEED:-//Alice}"
 export ASSET_HUB_PARAID="${ASSET_HUB_PARAID:-1000}"
 export ASSET_HUB_AGENT_ID="${ASSET_HUB_AGENT_ID:-0x81c5ab2571199e3188135178f3c2c8e2d268be1313d029b30f534fa579b69b79}"
-
 export ASSET_HUB_CHANNEL_ID="0xc173fac324158e77fb5840738a1a541f633cbec8884c6a601c567d2b376a0539"
+
+export PENPAL_AGENT_ID="5097ee1101e90c3aadb882858c59a22108668021ec81bce9f4930155e5c21e59"
 export PENPAL_CHANNEL_ID="0xa69fbbae90bb6096d59b1930bbcfc8a3ef23959d226b1861deb7ad8fb06c6fa3"
+
 export PRIMARY_GOVERNANCE_CHANNEL_ID="0x0000000000000000000000000000000000000000000000000000000000000001"
 export SECONDARY_GOVERNANCE_CHANNEL_ID="0x0000000000000000000000000000000000000000000000000000000000000002"