The ESB has expressed disappointment that it failed to win the contract to build and operate the new £120 million peat fired generator in the east midlands.

The ESB, who tendered for the project with its partner Foster Wheeler was tipped as one of the favourites. Instead, another favourite, the Finnish group IVO was awarded it.

ESB chief executive Mr Ken O'Hara said that the ESB had wanted to win the contract and the management had the full support of staff and trade unions in putting the bid together. Under the terms of the competition the electricity generated from the new plant will be supplied on a long-term contract to ESB.

The station will be located at Clonbulloge, Co Offaly, and will have a capacity of 117MW and will burn about one million tonnes of peat each year. The state of the art plant will be based on fluidised bed peat combustion technology.

Announcing the result of the competition, which was run by independent consultants, Public Enterprise Minister Ms O'Rourke said last night that the bid submitted by the IVO group offers the lowest price of all the bids. The average price of power is expected to be approximately 3.5p per unit throughout the life of the project.

Sources said the consultants had been very impressed by how keen the pricing was.

The project, which will take two years to complete will qualify for £21 million of EU funding. It will employ 450 during construction and will employ 250 working on the surrounding bogs, with 50 employed in the power station.

Bord na Mona which spent about £1.5 million researching feasibility studies for such a project reiterated its hope last night that it would get a shareholding in the new station.