Public sector firm, Bharat Heavy Electrical Ltd (BHEL), and Maharashtra's power generation arm, Mahagenco (Maharashtra State Power Generation Company Ltd) will develop a coal-fired 1,320 MW thermal power plant at Latur - the home constituency of Union Heavy Industry Minister Vilasrao Deshmukh - under an agreement signed between both firms in Mumbai on Wednesday.

Orders for first power unit in central Maharashtra are being placed with BHEL and it is expected to go operational within four years. Both companies will have equal shares in the joint venture, which will get further diluted to 26 per cent as financial institutions, banks and other entities will hold the balance 48 per cent stakes.

BHEL and Mahagenco may also set up gas-based 1500MW power plant, in case of non-availability of coal linkage, as per provisions made in the Memorandum of Understanding.

Commenting over fuel supply issue, Mr Deshmukh said: "The power plant would have a direct connectivity for fuel sourcing as the gas transportation line from the Krishna
-Godavari basin passes through Latur. We are also looking for coal linkages."