ORI Orica Limited

Chilean regional environmental authorities approved global diversified mining company Xstrata PLC's (XTA.LN) Cuervo hydroelectric project Tuesday.

Cuervo, one of three projects Xstrata's local Energia Austral unit is developing, has an installed capacity of 640 megawatts and will be located in southern Chile near the city of Puerto Aysen.

In addition to Cuervo, Energia Austral is also planning the 375-MW Blanco and 54-MW Condor projects and an 800-kilometer transmission line to connect the electricity into the central SIC grid.

The transmission line will share land rights with a similar line planned by the massive HidroAysen project, a joint venture between Chilean power generators Empresa Nacional de Electricidad SA (EOC, ENDESA.SN) and Colbun SA (COLBUN.SN).

HidroAysen, Chile's largest energy project, faces staunch opposition from environmental groups because of its plans to build a transmission line through pristine land in the Chilean Patagonia and to dam the Baker and Pascua rivers.

After the Cuervo project's approval, Energia Austral will submit to regulators an environmental study for its Blanco project, which will be located 30 kilometers south-east of Puerto Aysen.

It took more than two years for the Cuervo project to get environmental approval.

Once Energia Austral is in full operation, it will have a total generating capacity of around 1,000-MW.

In April, Xstrata's copper subsidiary announced it sold a 51% in Energia Austral to Origin Energy Ltd. (ORG.AU) while keeping a 49% in the hydroelectric-development company.

-By Carolina Pica and Graciela Ibanez, Dow Jones Newswires; 56-2-715-8929; chile@dowjones.com

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