By Safura Rahimi
An initial $150m will be invested in the Sadr project that is set to be built by an Iranian firm.
An Iranian engineering company has won an international tender and is set to construct a gas power plant in Iraq, according to Iran's semi-official Mehr News Agency.
Saneer Company will be the head contractor for the plant, set to be located in the Iraqi town of Sadr.
An Iranian official said that $150 million will initially be invested in the project, which will have two units with a capacity of 157 MW each.
The project will be implemented within two years, Mehrdad Jalalipur, director general of Iran's Goods Export and Service Department, added.
The move comes as Iraqi President Jalal Talabani heads to Tehran today to hold talks with Iranian senior officials on 'boosting relations' between Tehran and Baghdad, the state-backed IRNA reported.
Iran and Iraq - who fought a bloody war from 1980-1988 - have been working to bolster ties since the 2003 US-led invasion.
Last month Iraq invited Iranian firms to bid for contracts to build at least four oil refineriesacross the country, a move that some analysts see as politically motivated.
Mustafa Alani, senior consultant and director of the security department at the Dubai-based Gulf Research Centre, told Reuters last month that Iran is not likely to be able to meet Iraq's refining needs as the country is itself short in supplies and lacks the technological know-how.
According to Reuters, Iraq needs to attract investment from foreign firms to develop fields and boost output to help it solve its chronic fuel shortages.