Following two years of an arduous environmental permitting process, Chilean authorities are expected to make a final decision on the giant HidroAysen project by March or April, the megaproject's chief executive, Daniel Fernandez, said Thursday.

HidroAysen, which will spend at least $3.2 billion to build five dams to supply 2,750 megawatts to the central SIC power grid, responded to authorities' over 1,100 questions regarding its environmental impact study earlier in the day. The project had previously responded to some 2,600 questions and observations posed by environmental authorities.

The hydroelectric project, a joint venture between Chilean power generators Empresa Nacional de Electricidad SA (EOC, ENDESA.SN) and Colbun SA (COLBUN.SN), first submitted its environmental impact study, which has been plagued by delays, in late 2008.

HidroAysen has faced staunch opposition because of plans to lay a transmission line that would span nearly 2,000 kilometers through pristine land and to dam the Baker and Pascua rivers.

"If authorities approve the project, shareholders will make an investment decision in mid-2013, which, if positive, will see the first generation unit operational in 2019 and the last in 2025," Fernandez said.

Energy Minister Ricardo Raineri recently came out in support of developing large-scale power projects such as HidroAysen, so the nation can keep up with increasing energy demand.

As the country's gross domestic product is forecast to grow at a pace of about 5%-6% a year, some 10,000 megawatts of new installed capacity--roughly a doubling of capacity--will need to be added by 2020.

"There's a very direct correlation between economic growth and energy demand growth...If we look beyond 2020, to 2030, the country will need to nearly triple its current capacity and projects such as ours are key to being able to keep up with forecasted growth," Fernandez told Dow Jones Newswires.

Raineri has been on the offensive, reassuring investors about the security of developing big projects in Chile, after President Sebastian Pinera's nod to environmentalists in August regarding GDF Suez's (GSZ.FR) Barrancones thermal power project threw the energy sector into a tailspin. Pinera's request to "move" the site where Barrancones was set to be built essentially killed the project.

"I want to differentiate our project, from projects like [the 2,354 megawatt coal-fired] Castilla project. HidroAysen is a renewable energy project and we use Chilean resources, water in this case, instead of having to import expensive and contaminating fossil fuel," Fernandez said.

While Chile is looking to incorporate more alternative renewable-energy sources into its energy matrix and to acquire the technical capabilities to eventually make a production decision on nuclear energy, experts argue that large-scale hydroelectric energy projects also need to be developed so the Andean nation can keep up with burgeoning demand.

"The option of not having this project built is developing thermal generation projects, which will increase costs for end users," he said.

Environmental authorities are also scrutinizing HidroAysen's long transmission line which will run from the southern Aysen region to capital city Santiago.

Although Fernandez wouldn't comment on the price tag for the transmission line, but he did say that a section of the line would be built underwater and will cost nearly seven times more per kilometer than the above-ground line.

Local press has reported in recent weeks that with the addition of the underwater section, the transmission line will cost $3.8 billion, or nearly 20% more than the construction of the project's five power plants.

HidroAysen is talking with Chilean power generator Energia Austral Ltda., a subsidiary of global diversified mining company Xstrata PLC (XTA.LN), to see about sharing the transmission line. Energia Austral has three hydroelectric projects in its pipeline, also in the southern Aysen region.

"No decision has been made yet, but we're studying the situation to see if there are considerable synergies to be created from sharing the transmission line," said Fernandez, who added that a 300-megawatt project by local Electro Austral is also being considered for sharing the transmission line.

In any case, if approved, the construction of the transmission line, which will be outsourced, will take approximately three years and be complete in time to receive energy from the first of HidroAysen's energy units.

"We've seen a lot of interest from international EPC [Engineering, Procurement and Construction] companies. It's an interesting project for anybody up to the task of building 2,000 kilometers of transmission line," Fernandez said.

-By Anthony Esposito, Dow Jones Newswires; 56-2-715-8929; anthony.esposito@dowjones.com

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