A £4m wood recycling centre is being built to supply a biomass power station on Teesside.

The move will create 40 jobs over the next three to four years.

UK Wood Recycling (UKWR) will build the site next to the Wilton 10 Biomass Power Station on the Wilton International site, near Redcar.

From June, it will receive non-hazardous wood and turn it into products including horse, poultry and cattle bedding and composting as well as wood chip to fuel SembCorp Utilities' power station - the first of its kind in the UK.

SembCorp owns and operates the Wilton International site and has a power station there. But its new power generator, due to be operational by mid 2007, will burn willow coppice and wood chip to provide enough to power 30,000 UK homes.

The process is more environmentally-friendly at present than burning coal to produce power.

Geoff Hadfield, managing director of UKWR, said: "Around ten million tonnes of waste wood is produced every year in the UK and, of that, only 1.5 million tonnes is recycled.

"The remainder gets sent to landfill, creating methane gasses and contributing to global warming," he said.

"This project will recycle all types of non-hazardous wood, but particularly low-grade wood, a growing but difficult to re-use source."

UKWR received a £240,000 grant from regional development agency One NorthEast for the project.

Ian Williams, of One NorthEast's business investment and finance team, said: "We are delighted to have been able to play our part in this environmentally-beneficial project, which will be a major business asset to the Tees Valley and the North-East as a whole."

UKWR will recycle all types of non-hazardous wood, including low-grade woods such as MDF, chipboard, melamine, plain chipboard, hardboard, plywood and laminates, providing companies and local authorities with a greener and potentially more cost-saving option to landfill.

The wood supplied to Wilton 10 will be engineered to a certain specification before being burned.