The power station would be close to the planned LNG terminal at Milford Haven

The Welsh Development Agency confirmed that the discussion with three developers started three months ago.

Possible sites have been identified, but there are no definite commitments as yet.

The power stations would be close to the proposed liquefied natural gas (LNG) terminals, which are due to start up in late 2007.

Power would be generated in two ways, firstly by using gas supplies from the gas turbines and then by creating steam from exhaust gas at high temperatures.

The electricity supplied would be available to the national grid and also to the Total and Chevron Oil refineries at Milford Haven.

There is no intention, however, to use oil in the power stations, which are expected to be gas-fired.

The power stations, if they go ahead will take five years to build at Milford Haven

The power stations, if they proceed, will take five years to build, and it is expected they would be up and running by 2009 or 2010.

They would reduce south Wales' dependency on England for electricity supplies.

'Fuel supply'

The development of the two LNG gas terminals are the key to making the nearby power stations viable and attractive.

The terminals would be connected to the power stations.

Work on building a �250 million LNG terminal by the Dragon LNG consortium, is expected to start in the autumn, with up to 700 construction jobs and 30 permanent jobs being created.

A 15-year supply deal, announced by British Gas owner Centrica, was announced earlier this month

Oil giant Exxon Mobil has also announced plans to build a similar LNG plant on the old Esso refinery site nearby.

Brian Barrows, head of energy at the WDA, said the negotiations about the power stations were at "a very early stage" and that there were no plans as such to speak of.

He said the current arrangements with south Wales as an importer of electricity, meant an efficiency loss to the national grid each year which was the equivalent of a 250 megawatt power station.

"That is a lot of economic cost to the system and as a result, the grid in west Wales is imbalanced, and the grid will pay developers to connect new power stations there," he said.