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Norte Energia Suspends Work on Brazil's Belo Monte Dam

Earlier this month, a federal court ruled that the government's authorization of the 26 billion Brazilian reais ($13 billion) dam was unconstitutional. The court threatened to fine Norte Energia, the company in charge of the project, BRL500,000 a day should it continue with construction of the dam on the Xingu River in Para state.

"Norte Energia communicates that, due to a court decision, it is suspending the execution of civil construction on the Belo Monte hydroelectric dam and all other activities directly related to it," the company said in a news release. Norte Energia "is taking all available measures to reverse the decision, with the objective of returning the suspended activities to normality in the shortest time possible."

Because heavy rains impede progress during the southern hemisphere's coming summer months, company executives have said the suspension this month could delay work on the dam by as much as a year, depending on when they are permitted to resume work. The dam is set to go online by 2015, at which point it would be the world's third-largest hydroelectric dam.

In a decision earlier this month, federal judges in Brasilia said the government didn't hold the constitutionally-required meetings with indigenous communities that are affected by the dam before granting permission to build it.

Federal prosecutors in Para have asked courts on numerous occasions to block the dam's construction, alleging that required measures meant to alleviate the impact of the dam haven't been taken. Despite occasional success by the prosecutors, the federal government had managed to overturn all previous injunctions.

Norte Energia is composed of government-controlled utility Centrais Eletricas Brasileiras (EBR, ELET6.BR), or Eletrobras. Other stakeholders include the pension funds of state-run oil company Petroleo Brasileiro (PBR, PETR3.BR) and government lender Caixa Economica, as well as the utilities Neoenergia (GNAN3B.SM) and Cemig (CIG, CMIG4.BR), and mining company Vale (VALE, VALE3.BR). Eletrobras is the biggest shareholder, with a 49.98% stake.

Last month, indigenous leaders held three company engineers captive, saying they would only be released after the company provided means for the natives' boats to circumvent the construction site, which is impeding free travel along the Xingu. The engineers were released after Brazil's national indigenous institute Funai helped work out an agreement.

Write to Paulo Winterstein at paulo.winterstein@dowjones.com

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