TRANSFIELD Services and alliance partners Gippsland Water, CH2M HILL and Parsons Brinckerhoff have been awarded a contract to design, build, commission and operate a $128 million waste water treatment and recycling facility in Gippsland.

Transfield Services managing director Peter Watson said the contract strengthened the company's longstanding relationship with Gippsland Water and its association with the central Gippsland region.

The treatment facility will be able to treat up to 35 million litres of domestic and industrial waste water a day. Australian Paper is the initial primary customer and will buy a third of the treated water for use at its mill expansion in Maryvale.

Water not used by the Maryvale paper plant will be able to be onsold to other industrial users in the region.

"This contract builds on Victoria's leadership in water-recycling technologies and environmental sustainability," Mr Watson said. "We are proud to be chosen as part of the team and we are committed to deliver an outstanding outcome."

Commissioning is expected to be completed by 2008 and Gippsland Water hopes to have the plant operating at optimum capacity by June 2010.