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The US$2.2 billion plant in the Attock district - about 80 kilometers (50 miles) northwest of the capital, Islamabad - was partly financed by the World Bank, Asian Development Bank and Japan, the state-run Associated Press of Pakistan said.
The 1,450-megawatt facility will be operated by the state-run Water and Power Development Authority, the report said.
The plant includes a 52-kilometer (30-mile) water channel that diverts water from the Tarbela Dam in northwest Pakistan to run the unit's generators.
State-run television reported that the Water and Power Development Authority will earn US$500 million each year by selling electricity generated by the unit.
At a ceremony to mark the plant's opening, Musharraf said that Pakistan needs to build more dams to meet the country's energy needs, APP said.
Pakistan produces most of its electricity by state-owned hydroelectric power plants, but it also buys electricity from private producers who run their units on diesel, natural gas and coal.
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