The company is planning to build a dam and some 16 miles (25 km) of canals to connect the Huascacocha lagoon, located some 3,107 miles (5,000 km) above sea level, to the Rimac River, Lima's main source of drinking water.

Lima, one of the driest capitals in the world, is home to some 8 million of Peru's 28 million people and is plagued with problems related to water supply and scarcity.

The Rimac River is fed by runoff from Peru's glaciers, which scientists say have just 25 years before they run dry at the rate world temperatures are rising.

"All that's left to work out are some contractual questions," said Valfredo Ribeiro, OAS director in Peru.

Elsewhere in the country, OAS is working to build a $4 billion hydroelectric plant in conjunction with Brazil's state electricity company.

The Inambari project, which would generate some 2,000 megawatts per year, is roughly double the capacity at Peru's Mantario plant, the country's largest supplier.

Ribeiro said OAS has completed an environmental impact study of the project, and is working on agreements with various communities around the proposed plant, which is near Peru's eastern border with Brazil.

Construction on Inambari, which could start as early as this year, is expected to take four years. Brazil will likely to buy a significant part of its production.

**Reporting by Teresa Cespedes; Writing by Dana Ford; Editing by Marguerita Choy