Scottish and Southern Energy (SSE) is preparing the ground for a new gas-fired power station near Southampton, which will be capable of producing about 850 megawatts.
The firm has signed an agreement with ESB International to snap up half of the shares in Marchwood Power, enabling it to develop the eponymous power plant site.
With SSE expecting the project to cost about £400 million, it is anticipating its equity investment in the venture to total roughly £40 million.
SSE will then supply the fuel to the station and recoup the electricity generated, with Siemens coming on board as the gas turbine supplier.
Ian Marchant, chief executive of SSE, said the announcement was a timely one in the wake of the government's energy review announced earlier this week.
"There is a clear consensus that the UK will need a significant amount of new electricity generation capacity over the next 15 years," he said.
"At SSE, we have long recognised that adding to our leading-edge generation portfolio is a key means of helping to deliver reliable energy supplies and creating value for shareholders.
"This agreement is a major step forward in our ambitions to invest further in gas-fired generation plant, which will complement our other investments in gas, in coal-fired plant and in renewables."
Construction work is scheduled to start in 2007, with the site expected to be operational by 2010.
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