Severn Trent Water has donated #10,000 for an Elan Valley heritage project controversially snubbed by Birmingham City Council.
A spokeswoman for the water company said the funding represented the mark of a new working relationship with the Welsh community who saw their village flooded so that Birmingham could be provided with fresh water during the Industrial Revolution.
The planned museum will mark the heritage lost at Elan when residents were evicted from 100 homes around the 110 square mile valley to create the massive reservoir (pictured above).
None of the evicted residents was paid any compensation.
The leader of Birmingham City Council, Mike Whitby, defended the Council's decision to refuse funding, claiming the museum was of "limited direct benefit" to the people of Birmingham.
A team of officials from Rhayader had visited Birmingham to drum up public support for the scheme.
Yesterday a spokesman for the community applauded Severn Trent's move.
Community Arts Rhayader and District chairman Peter Cox said: "We are delighted that Severn Trent Water has agreed to make this generous contribution.
"We always felt that Severn Trent Water recognised the importance of this project and its historic ties with Birmingham and Wales."
Noel Hughes, manager at the Elan Valley works said: "This is far more than a donation.
"This money represents a close relationship between Severn Trent Water and the Elan Valley.
"Speaking as a member of the local community, I'm thrilled that we have acknowledged and recognised the importance of this museum."
Severn Trent said officials were meeting Elan Valley heritage campaigners at the end of the month to see how they could continue to provide long term support for the project.