Chile top court blocks Origin, Xstrata hydro unit

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(Reuters) - Chile's supreme court on Friday said it had blocked construction of a hydropower generation unit planned as part of global miner Xstrata Copper and Australian energy retailer Origin Energy's $3.6 billion hydropower Energia Austral project in the country's pristine Patagonia region

The unit is one of three hydropower projects planned by the joint venture.

The top court accepted an appeal by ecological organizations against Origin and Xstrata's 640-megawatt, $733 million Cuervo plant, which an environmental commission had just approved.

The decision marks the latest legal reversal for a mega energy project in power-strapped Chile, as environmental and indigenous groups increasingly challenge their construction in the world's top copper producer.

Energia Austral will have to include a specific land study, which was recommended by a geological and mining commission but "illegally" omitted in Cuervo's environmental impact assessment, the top court ruled.

"The project threatens the legally-protected environment, if clear, specific and effective mitigation or compensation measures aren't applied," the court said in a statement.

The firm will then have to include that study in a wider environmental study that the environmental commission will re-evaluate.

The Cuervo plant would flood 5,863 hectares, and has been met by stiff local opposition on grounds it would tarnish the region's unspoiled ecosystem and dent its tourism industry.

Chile's shaky energy grid needs significant new investment after years of neglect, exacerbated by a devastating 2010 earthquake and droughts. The country's power matrix has a capacity of 17,000 megawatts and the government aims to add another 8,000 megawatts by 2020.

Key energy projects, ranging from the $5 billion coal-fired Castilla thermoelectric power plant to the $3.5 billion HidroAysen hydro-power project, have faced massive citizen opposition on environmental grounds.

The Supreme Court is due to decide on the fate of Brazilian billionaire Eike Batista's Castilla project in coming months, while the country's top court recently gave the go-ahead to HidroAysen.

Energia Austral expects all three generation units to have environmental permits by the end of 2014 and to hand in the environmental impact study for the transmission line during the first half of 2013 and have approval 15 to 18 months later, company executives told Reuters in an interview last month. 



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