(Reuters) -Texas Governor Greg Abbott announced on Thursday that the first Texas Energy Fund (TEF) loan agreement will be used to fund a 122 megawatt (MW) natural gas power plant in Texas.

"Under the loan agreement, subject to customary financial closing procedures, total project costs are not to exceed $175 million, with the PUC providing a 20-year TEF loan of up to $105 million at a 3% interest rate," said a press release on Abbott's official website.

The governor's office added that the Kerrville Public Utility Board is the project's sponsor and will develop the facility, which is projected to begin operations by 2027.

The facility will interconnect to the South Load Zone adjacent to Houston Load Zone, one of the largest electricity demand centers in the state.