Under the 25-year, £800m PFI deal with local councils in the region, MVV will build a plant capable of handling 245,000 tonnes-a-year of waste.

MVV Umwelt beat off competition from Viridor, which had proposed building a plant at the less controversial New England Quarry site, near Lee Mill.

The South West Devon Waste Partnership is one of eleven projects to continue in the wake of Government spending cuts, which removed PFI funding from seven other initiatives.

Dockyard operator Babcock Marine is understood to be contributing to the building costs in return for using waste heat and electricity to power the shipping complex, which spends around £15m a year meeting its energy needs.

Up to 400 jobs will be created during construction, with about 35 permanent jobs once the plant is up and running.

Paul Carey, managing director of MVV Environment Devonport – a subsidiary of MVV Umwelt, said: “We are very pleased that, after a rigorous selection process, the Partnership has chosen MVV to help it manage the residual waste from Plymouth, Devon and Torbay and use it as a valuable resource.

MVV now be working on submitting a full planning application, including an environmental impact assessment, this spring.

The scheme faces strong local opposition because it is located close to residential areas around the dockyard complex.