MUZAFFARABAD, May 30: The Azad Jammu and Kashmir government has signed a memorandum of understanding (MoU) with the Canadian government to jointly construct a hydropower generation project in AJK at a cost of $80 million (Rs5 billion).

The MoU was signed by Fazal Mahmood Qureshi, AJK electricity department secretary, and Donald Olsen, project director of the Canadian Commercial Corporation (CCC), in the Kashmir House on Wednesday.

AJK Prime Minister Sardar Attique Ahmed Khan and Canada's senior trade commissioner in Pakistan Michael Clark were also present on the occasion.

Under the MoU, the foreign component of the project, covering the entire cost of electromechanical equipment and services, will be provided by the CCC through mixed credit (soft and commercial loans) whereas the rupee component, covering the cost of civil works, will be provided by the AJK government out of its PSDP.

The completion period of the project, designed to produce 45 megawatts of hydel electricity, is estimated to be three years. The first phase of the Jagran power project, located on the run of Jagran

River in the north-eastern Neelum Valley was built by a consortium of French and Swedish firms at a cost of Rs4.4 billion. Inaugurated in Oct 2000 by President Gen Pervez Musharraf, the 30.4 megawatts project contributes a sizeable yearly income to the AJK exchequer.

Although the identified potential of AJK in hydropower generation is nearly

5,000 megawatts and feasibility studies of several projects have also been conducted in the past, the total production however has not exceeded beyond 36 megawatts.

An official source told Dawn that the feasibility study of Jagran-II was carried out by the same consortium as part of the contract in 1997.

However, he said the CCC had decided to update the 10-year old study at its own costs with particular emphasis on its environmental impact.