The deal paves the way for preferred turnkey contractor Doosan Energy Systems to start main building work next April.
The Nevis biomass power station will be capable of supplying electricity to around 50,000 homes in the Newport area when it is built.
Pre-construction work is already got underway at the 10 acre Newport docks site, with 200 construction jobs set to be created and around 30 jobs once it starts commercial operation in June 2014.
Alastair Fraser, chief executive officer of Welsh Power, said having on Santander on board was a “major advance” for the business.
“Having a company of the status and quality of Santander choosing to partner Welsh Power on the development of Nevis is excellent news,” he added.
The Nevis plant will be fired primarily by wood chip and energy crops.