Oil Report

Two Brazil companies pull out of Belo Monte auction

* Withdrawal of two firms a blow to gov’t auction hopes

* Price limit seen as too low by many

RIO DE JANEIRO, April 7 (Reuters) - Two major Brazilian infrastructure companies said on Wednesday they would not take part in bidding for the construction of the giant Belo Monte dam in the Amazon rain forest, criticizing the auction conditions as not financially viable.

The decision by the Camargo Correa and Odebrecht construction groups dents government hopes for a competitive auction that would push down the price of energy production at the planned 11,000-megawatt project.

“After a detailed analysis of the licensing concession ... the companies did not find financial-economic conditions that would have allowed participation in the bidding,” the two companies, which had been expected to form a consortium for the bid, said in a statement.

Brazil granted an environmental license this year for the construction of the controversial hydroelectric dam in the heart of the Amazon rain forest, which would be the world’s third-biggest.

The project on the Xingu River in the northern state of Para will help the country cope with soaring demand for electricity, but has raised concern about its impact on the environment and native Indians.

The government has set a ceiling of 83 reais ($47) per megawatt-hour, which some companies have criticized as far too low.

The dam is expected to begin producing electricity in 2015 and the government has estimated the plant will cost around 20 billion reais ($11.2 billion) to build. Industry officials have estimated the cost could reach 30 billion reais.

The government initially set the dam’s cost at 16 billion reais, which caused large potential investors in the project such as GDF Suez to threaten to pull out.

Brazilian miner Vale SA VALE5.SA, which produces mainly iron ore, said last month it joined a consortium that would bid on the project together with construction company Andrade Gutierrez, the energy division of industrial conglomerate Votorantim, and utility holdings company Neoenergia.

Petrochemical company Braskem SA BRKM5.SA, France's GDF Suez and a few subsidiaries of Brazil's federal energy company Eletrobras are also interested in competing for the concession.

Companies have until April 14 to register consortiums for the auction planned for April 20. ($=1.78 reais) (Reporting by Denise Luna in Rio and Alberto Alerigi in Sao Paulo; writing by Stuart Grudgings; editing by Andre Grenon)