The $250million peaking plant will be built, owned and operated by Australian services and energy company Transfield Services Limited and will provide Western Power with electricity at times of peak demand in summer and winter.

Western Power has negotiated a 25-year power purchase agreement, estimated to be worth $320million, with Transfield to come into effect when the power station is completed in late 2005.

"About 400 people will be employed directly or indirectly in the 14-month construction phase and Australian content and local contractors will be used wherever possible," said Energy Minister Eric Ripper.

"The cost of about $250million includes two gas turbines, new sub-station works and gas lateral connection to the Damper to Bunbury natural gas pipeline.

"Western Power can now focus its efforts on Stage Two of the power procurement process for a further 330MW of new baseload generation," said Ripper.

Transfield Services now has four months to finalise its financial arrangements and obtain the necessary approvals.