A power ministry statement quoted power minister Pavithradevi Wanniarachchi as saying that the plant would use eco-friendly technology and funding is expected from Japan.
Industry sources say funding has been requested from Japan but no decision has been made.
Japan had earlier funded a study on natural gas fired plants. Natural gas prices had fallen in recent years due to new 'fracking' technology from the US.
Japan had expressed willingness to fund a coal plant in Puttalam about a decade ago but the plant was delayed amid protests and a 300MW plant was later built with Chinese finance and technology in the location.
Another two 300MW plants are being built in Puttlama now.
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