Local officials opposed the Punta Alcalde thermoelectric project in northern Chile but President Sebastian Pinera's government in Santiago overruled, giving Spanish utility company Empresa Nacional de Electricidad S.A. green light for construction.
Endesa says it will appeal the court ruling and acknowledged the dispute could end up in the supreme court. Victory for the Spanish conglomerate is far from certain.
How the project started despite shaky governance and transparency issues cited by critics remains unclear. Opponents and supporters woke up to the controversy months after work began on the 740-megawatt power generation project, about 500 miles north of Santiago.
Public reservations over the Endesa project followed environmental concerns and warnings it could devastate the local economy, especially the fishing industry.
Exactly how much has been spent on the construction and wages remains unclear.
Environmental politics have vociferous adherents in Chile and there's a precedent when a court decision halted work on a $4.4 billion Castilla thermoelectric power plant. The
2,100-megawatt joint venture between Brazilian entrepreneur Eike Batista's MPX Energia S.A. and Germany's E.ON is going through court appeals.
Yet another power project, the 2,750-megawatt HidroAysen hydroelectric dam complex in southern Chile, is also facing suspension following a court ruling that challenged the government's approval and environmental assessment.
In each case millions of dollars were spent on the projects before court interventions began. Analysts blamed poor government supervision and lack of transparency but also the haphazard activism of the country's environmentalist advocacy groups.
The energy industry's approach to doing business in Chile is said to be rooted in a belief -- mistaken, it seems -- that wealthy and influential businesses could sway over public opposition, government reservations or official bureaucracy.
In the case of Punta Alcalde, the loudest protests came from fishermen in and around the town of Huasco in Chile's Atacama region. The fishermen's representatives argued the power plant would ruin an environment that provides them with livelihood.
Endesa has a lot at stake in the project but the fishermen's representatives say the project would wreck local economy. The Llanos de Calle National Park and the Humboldt Penguin national reserve, considered natural treasures, will be at risk, the campaigners say.
Fishermen's legal representatives told the media carrying the project forward would affect marine resources and undermine biodiversity.
The Organization of Artisanal Fishermen of the Atacama Region says up to 300 fishermen risk losing their livelihood.
The power generation plant aims to increase electricity supplies to the region's sprawling copper mines complex, which are also targeted by environmentalist campaign groups for polluting the area.
Six major copper mining and smelting plants in the area consume huge quantities of electricity and water but they also provide employment. Advocacy groups say environmental protection should take priority and have called for policy shifts to make the copper industry more socially responsive and part of a wider sustainable development program.
The government's response to the demands hasn't been forthcoming.