The power plant will take 18 months to build and commissioning and test runs are to start by mid-2013.
The power plant, will be set up under Tokyo Cement Power (Lanka), a fully-owned subsidiary, on a 2.5 hectare land close to the Mahaweli river at Anguruwagala village, Bathalaya at Mahiyanganaya in the Uva province.
"Bio-fuel used for power generation is gliricidia, a type of fast-growing, soft wood plant with high calorific value and the fourth most important plantation crop in Sri Lanka," the company said.
It expects to outsource chopped gliricidia wood mainly from out-growers.
The 1.5 billion rupee cost of the power plant would be partly funded by internally generated funds of the Tokyo Cement group
Tokyo Cement is a joint venture between Nippon Coke & Engineering Company (formerly Mitsui Mining Co.),