SaskPower has signed a deal with Ontario-based Northland Power to build a natural-gas-fired power plant in Saskatchewan.

The 86-megawatt plant will be built near Spy Hill, 200 kilometres east of Regina, at a projected cost of $145 million. The Toronto company has signed a 25-year power-purchase agreement with SaskPower.

To pay for the new plant, Northland Power said it would raise $120 million in an offering of trust units and convertible debentures.

Bill Boyd, the minister responsible for SaskPower, said the deal is a good one for the province.

"There's an ongoing need as the economy grows — as industry grows — in Saskatchewan for additional power-generating capacity," Boyd said. "For SaskPower, there's not a finite need. There's a growing need."

Construction of the plant is expected to begin in June 2010, with commercial operations to begin no later than Dec. 1, 2011.