Israel's ZenithSolar in deal for China solar plants

* At market prices deal worth about $100 million

* Plants to provide heat and electricity

* ZenithSolar to ship first units to Australia in March

By Tova Cohen

TEL AVIV, Feb 22 (Reuters) - Israel-based ZenithSolar Ltd said it signed an agreement with the Chinese government to provide two combined heat and power solar systems in Gansu province, marking its first project in China.

Under the memorandum of understanding, ZenithSolar will provide the technology for the installation of two 10 megawatt cogeneration plants, CEO Roy Segev told Reuters on Tuesday.

Financial details were not disclosed. But based on market prices, the deal would be worth around $100 million.

Gansu province has a population of nearly 30 million and is located in northwestern China 1,200 kilometers from Beijing. It lies at the edge of the Gobi desert and has the best solar energy conditions in China, along with a cold climate and abundant land.

The two plants will provide electricity and process heat.

"One project is for industrial use, for a big industrial plant and the second one will provide thermal heating for a relatively large neighbourhood," Segev said, adding it will encompass about 5,000 homes.

In China, water heating is centralised, primarily using coal. The electricity generated by the plants will be supplied to the grid.

Segev said Gansu's Energy Bureau will recommend the use of ZenithSolar's system for other locations in the province after the operation of the two pilot plants. The Energy Bureau said a research center will be established to provide training and focus on the development of new solar energy technology.

"Gansu has a quota of 1,500 megawatts of solar business until 2015 and we are doing 20, so if all goes well our business will be much larger," Segev said.

"There's a lot of opportunity, not just in Gansu. We see Gansu as opening up to us the Chinese market."

Segev said his company's photovoltaic system was unique in that it efficiently cogenerates electicity and heat and the Gansu project was an opportunity to demonstrate the technology globally.

ZenithSolar, which was founded in 2007 and has raised $15 million, has a facility in Israel operating for two years and in March will ship its first systems to Australia.

"Over the course of the year we will start doing business in Spain, Italy and hopefully the United States," Segev said. (Editing by Louise Heavens)