MPX's Chile Castilla Power Project Fails to Clear Legal Hurdle
07/24/2012| 06:14pm US/Eastern
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SANTIAGO, Chile--Brazil's MPX Energia SA (MPXE3.BR, MPXEY) and opponents of its $5 billion coal-fired Hacienda Castilla power project, being developed with German utility E.ON AG (EONGY, EOAN.XE), on Tuesday failed to reach an out-of-court settlement over the project's future following a court-mandated appearance.
The 2,100-megawatt Hacienda Castilla project, which includes a port in northern Chile, received environmental approval in February 2011 but a lower court later froze construction originally scheduled to start this year.
Castilla's delay adds to concerns about Chile's long-term energy supply as the Andean country needs to nearly double its installed capacity over the next decade to 30,000 megawatts to keep up with rising demand.
In a June court appearance, MPX, controlled by Brazilian billionaire Eike Batista, offered the local community environmental mitigation measures, which were turned down.
The parties didn't settle in any of the two court dates, so Chile's Supreme Court will now rule on the lower court's previous decision that declared the environmental approval process illegal and halted construction.
Energy Minister Jorge Bunster, speaking on the sidelines of a meeting with the Consejo Minero mining trade group, said the delay won't derail other projects from coming on line.
When asked if this and the setbacks other power projects such as the $7 billion, 2,750 megawatt HydroAysen project had suffered in local courts would damage the country's image with investors, Mr. Bunster said it wouldn't.
He added the courts are an independent branch of government and as such, he wouldn't comment on specific rulings or legal procedures.
Despite Tuesday's setback, Pedro Pablo Gutierrez, a lawyer representing the project's port unit, told reporters he doesn't "rule out continuing talks" with the local community, which includes seaweed collectors and some 100 fishermen.
Lawyers expect the court ruling to be handed down in a few months.
(Carolina Pica contributed to this article.)
-Write to Graciela Ibanez at graciela.ibanez@dowjones.com
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