Chile's Patagonia dam project could be delayed

SANTIAGO, Chile – An electricity company developing a $7 billion project to power central Chile by damming Patagonian rivers is threatening to suspend its work until the government helps create public support for the project.

Most Chileans oppose the plans to tame two of the world's wildest rivers and build more than 1,000 miles (1,600 kilometers) of power lines between them and the grid that powers the nation's capital. Some mass marches against the project have turned violent.

The HidroAysen venture is 51 percent owned by European energy generator Endesa and 49 percent owned by the Chilean company Colbun SA, which said Thursday that Chile's lack of a coherent and widely accepted energy policy had become an obstacle. Endesa is a Spanish subsidiary of the Italian energy company Enel SpA.

HidroAysen said its board would review Colbun's recommendation to suspend environmental impact studies on the power lines, but would continue work approved by the Supreme Court on developing the five dams.

While environmentalists hailed the proposed suspension, some called it an effort to squeeze concessions from President Sebastian Pinera, who already promised that the transmission lines would be built at taxpayer expense.

"It's clearly a political move to pressure the government to take quick action on the public transmission line," said Sara Larrain, who directs the Sustainable Chile organization. "Colbun is saying: 'We're not going to continue investing on the second phase of this project (the transmission lines) while the government doesn't give us certainty that we will be able to construct it.' "

Colbun told Chile's regulator that such a huge and complex project can't continue without broad consensus on how the country should satisfy its future energy needs.

"This is the right time to stop and for the project to be analyzed in the framework of a national energy policy. We want to do things right," Colbun Chief Executive Bernando Larrain Matte told local Radio Cooperativa on Thursday.

"HidroAysen began in 2006 and we're in 2012. Chile has changed," he added. "Now we must engage in a national debate."

Finance Minister Felipe Larrain has said that the government does have a long-term energy policy and that Chile "cannot discard using clean energy like hydroelectric power."

The dams together could generate 2.75 gigawatts, nearly a third of central Chile's current capacity, within 12 years. Supporters say its economic benefits justify carving access roads through an area of Andean glaciers and deep green valleys and fjords and running transmission lines through national parks and private properties all the way to Santiago.

With Chile's energy-intensive mining industry clamoring for more power and living standards improving, some analysts say the country must triple its capacity in just 15 years, despite having no domestic oil or natural gas. Chile imports 97 percent of its fossil fuels and depends largely on hydropower for electricity, creating a crisis when droughts drain reservoirs or far away disputes affect fuel imports.

"This move can be interpreted as a display of discontent with an unclear government policy, or as a way for the company to get out of the increasingly expensive project," said Amanda Maxwell, director of Latin America Projects, a New York-based environmental and energy organization.

"But one thing is clear: This announcement clearly demonstrates that the future of HidroAysen is a big question mark - and that investors and international financial institutions should steer clear of this project."

In a statement to Chile's regulator, Endesa asked HidroAysen's board directors for an emergency meeting late Friday to discuss Colbun's recommendation to suspend the environmental impact assessment on the power lines.

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Associated Press writer Luis Andres Henao contributed to this report.