Prime Minister Mohammed Shia al-Sudani oversaw "the signing of a Memorandum of Understanding as part of a strategic cooperation framework with GE Vernova", his office said in a statement.
"The MoU covers projects to establish combined-cycle gas power plants with a total capacity of approximately 24,000 megawatts," it said.
It marks "the largest and most advanced electricity generation initiative in Iraq's history," the statement said, adding that it "also includes provisions for securing external financing through major global banks".
The signing comes at the conclusion of a visit to Iraq by a high-level US delegation comprising representatives from 60 private firms.
Iraq has been trying to move past decades of war and unrest, including a sectarian struggle after the 2003 US-led invasion that toppled Saddam Hussein.
Decades of conflict have ravaged its infrastructure, resulting in chronic power cuts, particularly during the searing summer months, when temperatures often reach 50 Celsius (122 Fahrenheit).
Despite sitting on large reserves of petrol and natural gas, Iraq's power plants are currently highly dependent on gas imported from Iran, which provides about a third of its neighbour's energy needs.
Baghdad has repeatedly said it aims to diversify energy sources away from dependence on Iran, which has often cut supplies.
The US administration has also urged Baghdad to eliminate "all purchases of natural gas" from Iran.
On March 8, it did not renew a waiver on sanctions that Iraq previously benefited from to purchase electricity from Iran.
- 'Energy independence' -
Steve Lutes, who led the US trade delegation to Iraq, said "we think that we can compete with anyone when given a level playing field".
"American companies want to lean into, you know, ideas of energy diversification and economic diversification," he added during an event in Baghdad.
There are "a lot of opportunities in oil and gas, and we want US companies pursuing those".
Iraq, which is both a major ally to Iran as well as a strategic partner for the US, has for years negotiated a delicate balancing act between the two foes.
The new electricity deal coincides with US President Donald Trump's announcement that his administration will start talks with Iran over its nuclear programme.
Farhad Alaaldin, the prime minister's advisor on foreign affairs, told AFP: "The Iraqi government has drawn up plans to guarantee its energy independence and meet the population's demand for stable, uninterrupted electricity."
To avoid power cuts, Iraq needs to produce 55,000 megawatts during peak hours.
With production currently standing at just 16,000 megawatts, the energy ministry hopes to exceed 27,000 megawatts this summer.
Iraq also signed on Wednesday a memorandum of understanding with UGTRenewable Group to build a solar power project with a capacity of 3,000 megawatts, and to develop up to 1,000 kilometres (620 miles) of high-voltage lines.
In a post on X, the US embassy in Baghdad said it was "proud that US companies GE Vernova and UGT Renewables signed agreements worth billions... to address Iraq's energy needs".
The new agreements comes amid fears of an international recession after Trump imposed sweeping global tariffs, including 39 percent duties on Iraqi imports.
According to the office of the US trade representative in Iraq, total goods trade with the oil-rich country reached $9.1 billion in 2024.
tgg/rh/jsa
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