A massive Chinese state-owned company has been given $25 million by the Victorian and federal governments to develop more Latrobe Valley brown coal.

Shanghai Electric will be announced on Monday as the final winner of government grants for new brown coal pilot projects. It is promising to build a $119 million demonstration plant to process coal into briquettes.

The Napthine government wants to spark wider development and export of Victoria's vast brown coal reserves. But environmentalists want brown coal phased out because of its high greenhouse gas emissions when burnt, even compared with more common black coal.

State Energy Minister Russell Northe said: “Victoria is home to one of the world's largest brown coal reserves and this joint investment will enable the development of new, smarter, cleaner and sustainable uses for this important resource."

The Shanghai Electric project will see one million tonnes of coal a year processed into 580,000 tonnes of briquettes and exported for use in a Shanghai power station. The company is promising 100 construction and 40 ongoing jobs from the project.