The new sum will buy hot-wash equipment enabling plastic bottles to be flaked and washed to remove any residues and adhesive labels. Once the plastic has been through this process it will be almost indistinguishable from new material.
It is hoped the first phase of the project will accept 10-12,000 tonnes of material producing 95 per cent finished flake.
Welsh environment sustainability and housing minister Jane Davidson said: Having clean, good quality recyclable material such as plastic bottles will be a key part in making our vision for a society that produces as little waste as possible. This new plant will also mean local jobs and investment.
The additional equipment, to be based in Ebbw Vale, will create a closed-loop system where plastic bottles from Welsh households can be sorted, cleaned and re-used in Wales.
Plastic Sorting project manager Janet Rawlings added: We are delighted with this further support which will allow us to purchase additional specialist equipment to produce a finished material of high quality for manufacturers in Wales and the UK.
Plastic Sorting used the first grant to develop a facility in Pontypool to sort plastic bottles into different polymers, which are then sold to plastics re-processors to be re-manufactured. The baled containers of single polymers from Pontypool will be sent to the Ebbw Vale site to be washed and colour-sorted.