French energy infrastructure firm Alstom signed a memorandum of understanding with Iraq on Wednesday to build a power plant in southern Iraq, which is suffering a severe electricity shortfall.
According to a report from AFP, Alstom is also set to renovate an existing power plant in the city of Najaf that it built 35 years ago.
"Patrick Kron, chief executive officer of Alstom, today (Wednesday) signed a memorandum of understanding with the Minister of Oil and Electricity, Hussein al-Shahristani ... for the development and modernisation of Iraq's electricity infrastructure," Alstom said.
The company has agreed to build a 1,200 MW power station between Najaf and the southern port city of Basra, and to rehabilitate a 180 MW plant in Najaf that it built in 1975.
The agreement also provides for training of Iraqi engineers and technicians.
A source with knowledge of the agreement said the new plant is likely to cost between 1.5 and 2 billion US dollars [1.8 trillion and 2.4 trillion Iraqi dinars].
"We hope to build up the electricity sector in Iraq which has been badly damaged in recent years and meet the country's growing electricity needs," Prime Minister Nouri al-Maliki, who attended the signing, said in a statement.
The statement said the company would begin talks with national and local officials in the coming weeks "for the practical implementation of these projects."
Iraq's daily power generation averages 8,000 megawatts, while demand in temperatures that have hit 54 degrees Celsius (130 degrees Fahrenheit) is typically more than 14,000 megawatts, forcing the use of unpopular rationing.
Only those with access to their own generators and fuel have been able to refrigerate foodstuffs or air-condition their homes around the clock.
Oppressive summer heat has triggered protests in several cities across the country, including in Basra.
Maliki has warned that two more years of shortages lie ahead as there is no quick fix to the problem, which worsened dramatically in the wake of the US-led invasion in 2003.