The new power plant would replace the bark boiler already present on the premises. The idea was to utilise the waste products created by the pulp and paper factory as well as the sawmill and there was an option to import coal via the existing harbour and to get peat from peat bogs in the area.
The company was formed on February 18, 1997, and shortly after that the first environmental impact evaluation was carried out. Permission was granted by the West Finland Regional Environment Centre two years later and on February 12, 1999 the board made the investment decision that made the launch of the plant construction possible.
In April 1999 the work with the plant's 1.8 kilometre cooling water channel was launched, in June the work with the boiler and the turbine was started and on December 17 the foundation stone was laid and the occasion was duly celebrated.
In May 2000 the assembly of the CBF boiler, which was delivered by Kvaerner Pulping Oy, was started. The boiler is the largest of its kind and required more planning than normal as the plant dimensions are several times those of normal biomass plants. The 130-metre high chimney for the plant, which was made using slip-form casting, was ready in the middle of May 2000 and a topping-out ceremony was celebrated for the power plant building. At the same time, Stig Nickull took over as the first full-time CEO of the company after the retirement of the Pohjolan Voima CEO Timo Väinämö.
In February 2001 the staff was at its largest, about 700 persons where then employed by the construction of the power plant. The interest in Alholmens Kraft was high both in Finland and abroad and there were up to 40 visitors every day during the autumn when the construction had proceeded further.
The generator arrived by sea to Finland on 12 March after taking more than a month to be delivered from the manufacturer VA-Tech in Austria. The foundation works for the ash deposits in Pirilö was started at the start of April 2001 and was finished in November the same year. On August 27, an environmental approval was given for the ash deposit.
The first coal ship, M/S Eira, arrived in Alholmen on May 28 with 18,000 metric tonnes of coal and the same day the first fire was lit in the boiler and the pickling process was started. It took three weeks to blow the steam pipes clean. In July, the turbine was commissioned and the first load of peat arrived on July 3 in Veli-Matti SyväjärviÕs lorry. July 11 was a historic day as the generator was started and for the first time connected to the power grid at 17.05 local time. The so-called 24-hour test of the power plant was carried out on the last day in July and after that, the trial run of the power plant started. During the trial, different fuel combinations were tested and adjustments were made to get the best possible operation availability. The power plant has to function without problem four weeks at a time during the trial run to make the hand-over from the supplier to the owners possible. The normal production was launched on December 1, 2001 when the owners in PVO-pool ordered electricity from the plant. Since then, Alholmens Kraft is given daily orders for electricity from Pohjolan Voima with a hourly production table.
Two years and ten months after the initial investment decision, on December 10, 2001, an inauguration ceremony was held for the largest biomass plant in the world. The speaker at the festivities was the Finnish Ministry of Agriculture and Forestry's director of the forestry department Aarne Reunala, Västerbottens läns landshövding Lorentz Andersson och bolagets styrelseordförande Timo Rajala.
The existing bark boiler was purchased from UPM Kymmene on December 14 and is now used as a auxilliary and peak production plant for Alholmens Kraft.
The commercial operation of the plant was launched on January 1, 2002.