A coal-supply deal could be worth up to £700m depending on the amount of coal needed.
The Finance Secretary said: "This Government has always believed that Scotland's significant energy strengths are key to achieving increased sustainable economic growth.
"Scotland has substantial comparative advantages in every major energy resource including renewables but also traditional fuels such as coal.
"That's why today's announcement is so significant. It signals a bright future for Scotland's energy sector.
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"This news combined with the work companies such as ScottishPower are doing to develop cutting-edge technologies like carbon capture and clean coal shows that the coal industry, one of Scotland's important indigenous fuels, will continue to be at the forefront in providing energy for generations to come.
"Clean coal, carbon capture, wind, marine renewables and hyrdo all have a key role to play as Scotland becomes one of Europe's energy powerhouses."
Ignacio Galan, chairman and chief executive of Scottish Power's parent firm, Iberdrola, said: "Through this agreement, Scottish Power is also demonstrating its support for Scottish coal, offering important opportunities for Scottish jobs and the Scottish economy, while reinforcing our commitment to coal generation in Scotland."
The First Minister, Mr Salmond, met with Mr Galan on Wednesday described the deal as "a declaration of faith in coal" and said it "shows that coal is a fuel of the future and not the past".
The coal is likely to come from reserves in Fife, the Lothians, Lanarkshire and Ayrshire. The firm currently mines in nine separate sites spread across the central belt of Scotland.
(GK/JM)
