State agency Eirgrid is to enter talks with a number of operators bidding to build a €300 million electricity interconnector between Ireland and Wales.

The agency, which operates the national electricity grid, will today contact five players who have expressed interest in the project, in what will be the second stage of the bidding process.

Eirgrid is issuing the five groups with a formal "invitiation to negotiate" today. It expects to name the successful bidder some time next year. The body said yesterday that it was not in a position to name the bidders.

The link, between the Leinster and Welsh coasts, will have the capacity to carry 500 megawatts of electricity, roughly the same amount of power produced by a medium-sized generating plant.

Eirgrid estimated yesterday that it will produce enough electricity to supply 350,000 households, around one-in-five of the total in the Republic.

There is no formal estimate of its cost, but industry sources have calculated the level of investment required at between €250 million and €300 million.

The interconnector is due to be completed and up and running some time in 2012.

It will allow electricity to travel in both directions, and is intended to open up the two markets to generators and suppliers at both sides of the Irish Sea.

Both markets are already connected by a pipe running between the Antrim coast and Scotland. Since November, there has been an all-Ireland market for electricity.