The agreement was signed by US Envoy for Pakistan and Afghanistan Richard Holbrooke and Secretary Water and Power Javed Iqbal at a local hotel in Islamabad.

The project will be completed in two years at a cost of $375 million (Rs. 32 Billion) to produce 150 megawatts of electricity.

It will also reduce the dependence on imported fuel and oil and will save Pakistan $45 million (Rs. 3.8 billion) per year in fuel cost.

The project using new technology of 'clear' power will serve about 600,000 homes in the area.

Javed Iqbal, Secretary Water and Power, appreciating the contribution by the US government, said the project would further strengthen the bilateral relations.