Brazil's environmental regulatory agency Ibama issued an operating permit for the 11.2GW Belo Monte hydroelectric plant on the Xingu river, but a related transmission project has stalled.
Brazil's electricity regulator Aneel could be forced to revoke financially troubled Spanish contractor Abengoa's contract to build the 1,816km (1,128mi) Belo Monte transmission line.
Union leaders confirmed that Abengoa has suspended work on the transmission line and that over 1,500 workers have been fired.
Aneel has been notified of the suspension of construction of the line and says it is evaluating next steps. The concession can be suspended if Aneel determines the company is not meeting its contract commitments.
The Belo Monte transmission line is the first of three large transmission projects that will deliver power to the grid from the R26bn ($6.97bn) hydroelectric complex.
Abengoa won the build-and-operate contract for the R1.3bn transmission project in December 2012. The company blamed construction delays on a failure to secure environmental licensing for the project.
The operating permit granted to the hydroelectric project late last week allows developer Norte Energia to begin filling the reservoir. But the suspension of the transmission project will likely mean the new plant will be forced to postpone the operation of some of its turbines.
Abengoa is one of the largest privately owned transmission companies in Brazil, with over 3,400km of transmission lines currently under construction.
Ibama director Marilene Ramos said an operating permit delay would have "punished consumers", who would be forced to pay a higher price for electricity.
Ramos added that once the Belo Monte plant is fully operational, it will produce electricity equivalent to 19 thermoelectric plants, potentially reducing emissions and fossil fuel consumption.
In recent years, Brazil has been trending toward greater thermal power generation, based on imported LNG, because of persistent droughts and challenges facing new hydroelectric projects.
Norte Energia needs to fulfill 34 additional mitigation requirements, including investment in basic sanitation for Altamira, where the project is located.
The Belo Monte complex is expected to start generating power in March 2016, when a 233.1MW auxiliary powerhouse will begin operating. Between April and December 2016, five additional turbines with 611.1MW of capacity each are scheduled to begin operating, but not all of the capacity is likely to be delivered to the grid right away because of delays in transmission line construction.
In September 2015, the government had rejected the operating permit, mainly because of questions related to local indigenous communities. Last week, the national Indian foundation (Funai) authorized Ibama to issue the permit, but the vast project remains controversial.
Local NGO Instituto Socio-Ambiental criticized Funai, arguing that local indigenous peoples continue to face "numerous vulnerabilities" as a result of the Belo Monte plant, adding that the permit had been issued before key compensation projects were completed. During 24 November event in Brasilia to announce the approval of the operating permit, indigenous Brazilians from 14 ethnic groups invaded the auditorium to protest the agency's decision.
Shareholders in Norte Energia include state-controlled Eletrobras and its subsidiaries with 49.98pc, pension funds Petros and Funcef with 10pc each, Neoenergia with 10pc, Cemig with 14.27pc, Vale with 4.5pc, Sinobras with 1pc and J Malucelli with 0.25pc. All of the shareholders are Brazilian, with the exception of Neoenergia, in which Spain´s Iberdrola holds a 39pc stake.
Norte Energia says it has invested nearly R4bn to mitigate the environmental and social impact of the project.
Date: Nov 30, 2015