The plant will use cheap electricity from the new power station on the Baglan Energy Park near Neath to manufacture paper tissue.

It is the largest project attracted to the site since permission was granted for the gas-fired power station, which is near completion, in 1998.

The paper mill will take two years to build and 1,000 workers will be taken on for the construction phase.

The park's strategic location made it an attractive proposition for Intertissue which looked at a number of potential sites Hilary Hendy, WDA

Councillor David Lewis said the news was "wonderful" for Neath Port Talbot.

"We have waited a long time to turn around the decline in manufacturing industry and this is a major shot in the arm for us," he added.

Announcing the project on Wednesday, Welsh Economic Development Minister Andrew Davies said Wales had beaten off stiff competition from Europe to secure the deal.

The plant will be run by Intertissue Ltd, which is part of the Delicarta Group from Italy.

"This is a coup for Wales and a significant addition to the Baglan Energy Park," said Mr Davies.

Major opportunity

"The company had decided to enter the UK market, but the co-operation between the assembly and its agencies ensured that these jobs will come to Wales."

The company will receive a grant from the Welsh Assembly to set up and support from the Welsh Development Agency (WDA).

Hilary Hendy, the WDA's international executive director, said she was delighted that such a major investment was due to be secured after two years of negotiations.

"This is a major manufacturing opportunity for Wales and will provide a significant boost for the energy park, placing it firmly on the international map," she said.

"The park's strategic location, coupled with a competitive electricity supply and the availability of a range of utilities made it an attractive proposition for Intertissue which looked at a number of potential sites."

Office block

The WDA will oversee site preparations, including the installation of preparatory infrastructure works.

The company is leasing part of the former Arjo Wiggins paper mill in Cardiff from the WDA until the new plant is completed.

There are already 35 people from the Port Talbot area working in the Cardiff mill who will transfer to Baglan when the new plant is ready.

A factory with 170 employees making car components has already opened at the Energy Park which is being jointly developed by the WDA , Neath Port Talbot Council and BP.

Two other factories are nearing completion along with a 50,000 square foot office block.