Work will start on an innovative £50m waste treatment plant in Cardiff later this year.

Duncan Grierson, chief executive of Sterecycle, said work on a 200,000-tonne-a-year autoclave – which uses steam to treat waste – at a site in the east of the city off Wentloog Road would start in December.

The company already runs a smaller plant in Rotherham and is planning to bid for the contract to deal with the black bag waste of five South Wales councils – Cardiff, Newport, Vale of Glamorgan, Caerphilly and Monmouth.

Its rivals include Viridor, whose controversial incinerator proposal for Splott was rejected this week, and US firm Covanta which is planning a giant incinerator in Merthyr.

Mr Grierson said that Sterecycle would build the autoclave before the contract is awarded because of the shortage of landfill in South Wales.

He said: “We know that there’s a lack of landfill in the area and we think we will be quite well placed to win that contract. But if we don’t, there is a lot of waste in the South East Wales region including commercial waste and other waste.”

Environmental groups like Friends of the Earth Cymru are keener on autoclaving than burning waste but have concerns about the uses for the final product, a type of organic fibrous material.

Mr Grierson said that around 50% of the end product of the company’s existing plant in Rotherham, was the fibre which was being used in land reclamation schemes as a type of compost.

He said that in South Wales the company would look at similar uses and was also considering an anaerobic digestion plant to compost the waste into a biogas that could be burned to produce energy.

Around 25% of the waste produced by an autoclave needs to be either land-filled or burned while the remainder is separated out as plastics, metal and glass for recycling.

One of the key issues that will determine which company wins the contract to process South Wales’ waste will be cost and Mr Grierson told the Echo Sterecycle could compete on overall cost, as it is cheaper to build despite being more expensive to run than an incinerator.

He said: “We believe in recycling rather than destroying waste so that we can recover a lot of materials, plastics and metals in the waste and get clean compost.”

The proposed plant, given planning approval this week, is expected to create 60 long-term jobs and work for more than 100 during building.

It is hoped that if building starts later this year, the plant could be up and running by 2013/14 and process around 200,000 tonnes per annum – roughly the amount the five councils expect to produce.

All five councils have been in the process of giving approval to launch a joint procurement exercise for a waste contractor with the help of guaranteed annual funding from the Welsh Assembly Government