Brazilian Consortium to Build Amazon Dam

SAO PAULO, Brazil -

A Brazilian consortium won an auction Monday to build and operate a major dam in the Amazon rain forest following a bidding process disrupted by protesters who claim the project will displace thousands and harm the environment.

Consorcio Madeira Energetica, a group that includes participation by big construction company Norberto Odebrecht SA, beat out two other consortiums with participation by Spain's Endesa SA (nyse: ELE - news - people ) and Franco-Belgian utility Suez.

Brazil's government expects it will cost $5.3 billion to build the Santo Antonio dam on the Madeira River near Bolivia. Consorcio Madeira Energetica said it will sell electrical power from the dam for 78.87 reals (now $43.82) per megawatt hour.

The auction was delayed for hours while riot police removed about 80 protesters who stormed the Brasilia offices of Brazilian electric power agency Aneel before dawn.

Brazil's Movement of Dam-Affected People organized the protest along with groups representing landless workers, saying the 3,150 megawatt dam and another one nearby could force 10,000 people from their remote rural homes.

Police arrested eight demonstrators, and several hundred marched later from the agency's office toward Congress.

Environmentalists say the dam could harm a pristine part of the Amazon, but the government says it is needed to help prevent electricity shortages in Latin America's largest country.

The dam projects are Brazil's first large hydroelectric expansion since the Xingo dam on the Sao Francisco river was completed in 1994. About 75 percent of Brazil's electric energy is supplied by hydroelectric dams.

In May, the government is expected open bidding on the Jirau dam - along the same stretch of the Madeira river as the Santo Antonio dam - which is expected to generate 3,326 megawatts of energy. Together the two dams are expected to supply 8 percent of the country's energy needs.

The Santo Antonio dam is expected to come on line in 2012 and the Jirau in 2013.

The government says they are necessary to meet Brazil's growing energy demands and says they are they are designed to avoid creating large reservoirs, which have previously caused environmental disasters in Brazil.

But critics say the new design leaves the dams more vulnerable to reduced electricity generation in times of drought, an increasingly common phenomenon in Amazon.

The dams' long distance from the country's industrial southeast means they will require thousands of miles of transmission lines through the western Amazon, creating environmental concerns and substantially raising power costs.

Scientists with the National Institute for Amazon Research have said the area to be flooded by the Jirau could be nearly twice as much as planned.

They also warn the dams could lead to the extinction of ecologically and economically important fish species and lead to an increase of malaria-carrying mosquitoes.

Copyright 2007 Associated Press. All rights reserved. This material may not be published broadcast, rewritten, or redistributed.