Tenaga Nasional is planning to build a 300MW gas-fired power station in Sabah state of Malaysia.
The news comes after Malaysia's federal and Sabah state governments dismissed a plan to build a new coal-fired power plant.
Tenaga is assessing whether it would be economical to pipe in the gas from another part of the state or import it as liquefied natural gas for the gas-powered plant.
The company's coal-fired power plants contribute about 40% of its power supply.
In January the firm warned of greater pressure on its margins for the rest of the year on skyrocketing price of coal. In a worst case scenario, Tenaga's 2011 earnings would be 20% lower than 2010, reports Reuters.