The eco-friendly energy plant will produce an annual 100 megawatts of power in the southern port city of Pohang by 2010.

"We expect the fuel cell business will create 400 billion won in revenue a year from 2012," the company said in a statement.

Fuel cells are electrochemical power generators which produce electricity and heat without combustion and the pollutants associated with burning fuel.

POSCO has been seeking to expand into the lucrative energy sector by acquiring an independent power firm and buying a stake of a U.S. manufacturer of fuel cell plants.