UPDATE 1-Chile top court OKs mega HidroAysen energy project

Wed Apr 4, 2012 2:11pm EDT

* Supreme court rejects appeals against mega project

* HidroAysen seeks to provide 2,750 megawatts

* Patagonia project criticized on environmental grounds

* Chile grappling with feeble energy grid (Adds top court quote, background)

By Erik Lopez

SANTIAGO, April 4 (Reuters) - Chile's Supreme Court said on Wednesday it rejected seven appeals filed against the $3.5 billion HidroAysen hydro-power project, clearing the way for the mega-dam project to go forward.

HidroAysen, a joint venture between leading generator Endesa Chile and partner Colbun, has sparked massive protests over potential environmental consequences in Chile's pristine Patagonia region.

A local court had previously dismissed appeals against the project, which comprises five power stations and plans to generate 2,750 megawatts of electricity by damming two major rivers.

"In today's resolution.... the Supreme court confirmed the rejection (of the appeals)," said Jaime Rodriguez, spokesman for Chile's top court.

Chile, the world's top copper producer, is suffering from years of underinvestment in its shaky energy grid and desperately needs to reform electric transmission lines and energy generation to keep up with growing demand.

The government estimates that to keep up with that rising energy demand, some 8,000 megawatts of capacity will need to be added by 2020 to the current 17,000 megawatts in the nation's power matrix.

Environmentalists say the hydroelectric dams will flood unspoiled valleys and wreck rivers in Patagonia, while industry players argue the project is crucial to the power-starved country.

HidroAysen still needs governmental approval for a 1,250-mile (2,000-km) planned transmission line to channel power to capital Santiago. The entire complex is expected to be operational by 2025.

"It's not right to say a green light has been granted to the project," said Patricio Rodrigo, executive secretary of a defense group for the Patagonia region. "The company survived these appeals... but criminal suits for tinkering with reports are ongoing."

Shares in Endesa and Colbun were both trading 0.11 percent lower on Wednesday afternoon after the announcement, somewhat outperforming Santiago's blue-chip IPSA stock index, which was down 0.66 percent. (Writing by Alexandra Ulmer; Editing by Bob Burgdorfer)

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