AGL Energy (ASX:AGL) shares were nearly 1% higher in Wednesday trade after the company said late Tuesday it has reached a final investment decision to proceed with the Kwinana Gas Power Generation 2 project.

Kwinana 2 is a 220 megawatt open-cycle, dual-fuel gas turbine power station that will be co-located with the existing Kwinana Swift facility in Western Australia.

Construction on the project is expected to start by the middle of the year, and the launch of operations is targeted for the fourth quarter of 2027, with an expected asset life of 25 years, per the filing.

The project's total cost is pegged at about AU$490 million, inclusive of the gas turbines, and roughly one-third of the total cost is expected to be spent this fiscal year. AGL Energy said its forecasted growth capital spend for the said year is now about AU$750 million.