A company building a wood-fired power plant on Kauai has finalized its financing plans and is scheduled to begin construction early next year on the facility that will provide an estimated 11 percent of the island’s electricity needs.

Green Energy Team LLC received a $72.9 million loan guarantee from the U.S. Department of Agriculture’s Rural Utilities Service for the 6.7-megawatt plant to be built on former sugarcane land near Koloa, according to a news release from the Kauai Island Utility Cooperative, which will buy the electricity.

The facility, which will burn local wood chips harvested from local trees, will provide enough electricity to serve about 8,500 homes and replace roughly 3.7 million gallons of imported oil annually.

KIUC will buy the electricity from Green Energy Team under a 20-year power purchase agreement at a price below current the cost for generating power by burning oil. The utility did not disclose the exact price it will pay.

Construction on the plant is expected to begin in early 2013 and completed by 2014. Construction financing is being provided by Deutsche Bank.