State-owned SaskPower will transform a generating unit at its Boundary Dam Power Station into a carbon-capture coal-power plant in Saskatchewan, Canada.
The $1.31bn project is in line with the Saskatchewan provincial government's plan to meet the federal decree to produce cleaner coal power.
The plant will have the capacity to generate 110MW of electricity per annum and will reduce greenhouse gas emissions by one million tons, once it starts operations in 2014, reports Reuters.
The project has received grants of $252.63m from the federal government while Saskatchewan will provide $1.05bn.
SaskPower vice-president of clean coal capture projects Mike Monea said the economics of revamping the 42-year-old unit to capture carbon are similar to building a new plant powered by natural gas, though gas prices are unpredictable.