Brazil to clear contested Jirau hydro dam work

RIO DE JANEIRO (Reuters) - Brazil's environment ministry said that its environmental regulator Ibama will hand down on Wednesday the initial clearance for construction of the 3,300 megawatt Jirau hydroelectric plant to begin.

In so doing, Ibama will approve the hotly contested plan of the concession holder to move the site of the dam on the Madeira River nine kilometers from the original site laid out in the project's feasibility and environmental impact study.

The consortium, led by France's Suez group, that won the concession over a competing group, led by local construction company Odebrecht and state utility company Furnas, says its alteration of the plan will save over 1 billion reais in construction costs.

Odebrecht, which won the 3,150MW Santo Antonio dam concession -- the first phase of the two-dam Madeira River Hydroelectric Project -- has threatened to tie the issue up in the courts, saying Suez should have proposed the change before the auction or conduct the five-year environmental study anew.

The federal public prosecutor's office has threatened to sue the head of Brazil's electric energy regulator Aneel, Jerson Kelman, for approving the change in the project's site without requiring a new environmental study.

Kelman has said that the auction for the dam was simply for the winner to supply a certain quantity of energy for a specified time frame to the national grid. And it was always understood by participants that alterations in the project could be proposed.

The Brazilian government has been eager to smooth over the bitter fight between Odebrecht and Suez, which are partners in other generation projects in Brazil, as it is counting on the energy from the dam projects to meet expected demand from the growing economy from 2012, when the Madeira complex is expected to come online.

It is important that construction of Jirau begin soon before the rainy season begins in the Amazon state of Rondonia, or the window for the project's start will be closed for six months at least until rains recede.

The Suez group is hoping to bring Jirau online before it is obliged to sell 70 percent of its energy in 2012 to the national grid, so that it can sell on the much more lucrative spot market and recover its investments faster.

(Reporting by Denise Luna; Writing by Reese Ewing; Editing by Christian Wiessner)