But the project's Brazilian backer, MPX Energia SA, insisted that its "project is fully compliant with existing environmental regulations." Shares of both MPX and its German partner, E.ON AG, fell Wednesday.
Rio de Janeiro-based MPX, owned by Brazilian billionaire Eike Batista, originally proposed the project, which has been designated for the Atacama coast, to boost regional power supplies to mining companies such as Vancouver's Teck Resources Ltd. (NYSE: TCK) and Toronto-based Barrick Gold Corp. (NYSE: ABX), both of which are planing new mines in Atacama.
The country has been suffering frequent blackouts ever since it suffered a massive 8.8-magnitude earthquake in February 2010, which has hampered both energy and mining business activity.
Citing environmental concerns, Judge Sergio Munoz on Tuesday ordered MPX to resubmit an environmental impact study in a statement explaining the court's ruling. Instead, the court requested that the new study consider combining construction of a port and the proposed power plant into a single project.
MPX had originally conducted separate studies on the port and the plant's environmental impact.
Environmental groups hailed the decision.
Alex Muñoz, executive director of the environmental NGO Oceana, told the Santiago Times that the decision is a significant step in favor of local environmental concerns. "It is a fact that the coal-fired thermoelectric power plants (like La Castilla) will be confronted with increasing opposition and difficulties in obtaining approval due to the great environmental, social, and economic harm that they cause," he said. "Chile has clean alternatives for producing energy and we have an opportunity to make the political changes necessary to take advantage of those alternatives."
Shares of MPX, which said in a statement that it will "reassess its business plan," fell half a percentage point, and E.ON shares were down 0.17 percent.