Financial terms of the deal were not revealed.
The Gold river project is on the site of a former pulp and paper mill and would produce about 90 megawatts of electricity from waste for the BC Hydro electrical grid.
"This project would be a boost to Gold River's economy while helping us meet the surging demand for clean, renewable energy," said David Kingston, chairman and chief executive of Green Island Energy.
"Using refuse derived fuel to generate electricity makes sense. This will help make us more economically self-sufficient and allow us to generate our own energy. Not only will we be able to power our own homes, it will also help us reduce imports of electricity on the Island while minimizing our dependency on landfills and the need to transfer waste across territorial borders."
Covanta Energy, based in Fairfield, N.J., owns and operates 52 renewable energy projects around the world, 37 of which are energy-from-waste operations.
Green Island Energy said it will work with Covanta to design the power plant and negotiate deals with B.C. municipalities, including Vancouver, for a supply of municipal solid waste as fuel to produce power from the plant.
Covanta has been rapidly growing its business, mainly from acquisitions, construction revenues from the expansion of a power plant in Hillsborough County in Tampa, Fla., rising waste disposal prices and rising power sales in India.
In the 2007 fourth quarter, the company's operating revenues rose 24 per cent to US$395 million from $318 million. Net profits soared to US$72 million for the quarter, up from $12 million in the year-ago period.