The deal will create a 17-megawatt capacity biomass-fuelled energy centre, with an integrated wood-pelleting plant that can process 250,000 tonnes of locally sourced timber annually.

IP will support the proposal through the planning process and until the final sale of the assets in Inverurie can be completed, but the development does not signal IP's diversification into the green energy centre business.

Eric Chartrain, vice president of European papers, said: "We are pleased to have reached this important stage in the proposed reindustrialisation of our former mill."

The paper giant's agreement has been signed with Integrated Energy Systems International, a consortium of companies that hopes to gain planning consent by the end of the year.

The build time thereafter is 10 months for the wood-pelleting plant and 24 months for the biomass centre.

Once completed, the electricity generated will be exported to the national grid, with some potential for supply to an onsite high-energy user such as a data centre.

IP closed the Scottish mill in March 2009 with the loss of 371 jobs. The mill's closure removed 250,000 tonnes of uncoated freesheet capacity from the group's European output and saw the departure of IP from the UK paper manufacturing sector.

The global paper and packaging group manufactures uncoated paper, office paper, and industrial and consumer packaging.