ISLAMABAD, May 11: Pakistan on Tuesday issued the Letter of Interest (LoI) to a newly formed US company, Amzo Corporation, aimed at upgrading the feasibility study for constructing the $1.2 billion Munda Dam in the NWFP.

The LoI signing between Amzo and the Private Power and Infrastructure Board (PPIB) took place at a ceremony presided over by Water and Power Minister Aftab Ahmad Khan Sherpao.

The feasibility study would be completed in 18 months. The dam is expected to generate 740mw of hydel electricity and provide a live storage capacity of 0.67maf water.

Talking to newsmen, Amzo representative Ahmad Masud Chaudhry confirmed that his was not a listed company.

He said Amzo was "formed and registered in the US in November 2002 by four-five companies to specifically undertake the Munda Dam project". He further said that those (four-five) were real estate companies and none of them had any experience in the energy sector.

He said a number of internationally reputed companies were being hired to perform consultancy, feasibility and financial activities. PPIB managing director Zafar Ali Khan said Amzo had been asked to submit various milestones that it would have to achieve and then the study would be examined by experts.

On completion of the feasibility study, the company would be issued a letter of support subject to successful negotiations on power tariff. The project is expected to be commissioned by 2012-13, he said.

A government official said Amzo representatives had met President Pervez Musharraf in Washington about two years ago and desired to return to the country with investment that led to the signing of the LOI.

The feasibility study was originally conducted by Japanese consultants who suggested about 10 cents per unit (Kwh) generation cost. But, Azmo representative claimed that many assumptions of that study were wrong and the tariff setting stage was far away.

Mr Sherpao said the site for the dam to be built on the Swat River was located about 5km upstream of the existing Munda Headworks at Abazai near Shabqadar Deri town, 37km north of Peshawar.

He said the project would contribute to overall economy growth and generate Rs361 million as 'water user charge' annually for the NWFP government. He said the Munda Dam, on completion, would help improve equity in water allocation, reduce flood risks in Nowshehra and irrigate 29,000 acres besides benefiting 30,000 acres of already irrigated areas.