The Elan Valley reservoirs cost �6m to build at early 1900s prices

Birmingham City Council turned down a request for cash towards the Elan Valley project earlier this month.

But a deal was agreed after Birmingham Lord Mayor John Hood met a deputation from nearby Rhayader on Friday.

Mr Hood launched the appeal with �101 to mark the 101 years since the opening of the Elan Valley reservoirs.

The valley, near Rhayader, was flooded to provide the UK's second city with clean water.

To reflect this, Community Arts Rhayader And District (Carad) asked for a donation towards the cost of the �550,000 museum. But Birmingham Council initially refused the request, saying the museum would provide no benefits to its people.

We've had a very positive meeting with the lord mayor Carad's Peter Cox

However, Carad's chairman Peter Cox said he was delighted by the council's change in position.

"We've had a very positive meeting with the lord mayor. He said he would launch an appeal fund in which ordinary people and businesses in the city could donate money towards the project," he said.

Some money towards the museum has already been raised, but between �60,000 and �70,000 is still required.

"This is a very positive start to the appeal. We will now have to work hard to raise the profile of the appeal in Birmingham," said Mr Cox.

He added that Carad would be attending the Lord Mayor's Show in Birmingham in May to increase the profile of its fund-raising.

Rhayader mayor Claire Evans said the museum was a great opportunity to forge stronger links between Birmingham and the rural valley.

The Elan Valley's six reservoirs send 360m gallons of water a day along a 70-mile pipeline to Birmingham and also to parts of south Powys and south Wales.

Work started on the reservoirs in 1893

The art group's museum plans to highlight the social and economic impact of the development of the reservoirs.

But the proposal looked in jeopardy when the Birmingham authority refused funding.

However, coverage on BBC radio and TV programmes prompted support for Carad's campaign from Birmingham people, said chairman Mr Cox.