Power generator AGL Energy Ltd (ASX: AGK) sealed a deal with New Zealand's Meridian Energy to build a $1 billion 420 MW wind farm in Victoria, set to commence operation by 2013, according to a Thursday statement furnished by the energy company.

AGL said that once completed, the wind farm would be the largest in the state and would power some 220,000 Victorian households, with prospects of preventing of up to 1.7 million greenhouse gas emissions each year from the start of its operations.

AGL and Meridian are set to split the project's capital cost construction as AGL said that a $290 million contract for engineering and construction work has been awarded to a consortium of Vestas-Leighton Contractors, who are set to install 140 Vestas V112-3.0 MW wind turbine generators.

AGL said that total cost of the project would be funded by the company's existing balance sheet, entitling it to collect the wind farm's whole energy output and renewable energy certificate.

Company chief executive Michael Fraser is upbeat that the joint project would reap substantial benefits for both AGL and Meridian as he noted that by using Vestas' new power turbines, the project was able "to increase the capacity of the wind farm, while reducing the number of towers from 174 to 140."

Mr Fraser said that the positive adjustments enabled the partnership to save operational costs of over $30 million with major environmental benefits plus the economic benefit of employing 400 direct workers and 800 indirect workers during the project's construction period.

He added that once fully operational, the wind farm is se to hire 30 full time staff who will be tasked to run the facility for at least 25 years.