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SANTIAGO, Jan 29 (Reuters) - Endesa Chile said on Thursday it was suspending the development of its $1.4 billion Punta Alcalde coal-fired power project and its associated transmission line, knocking more than 3 percent off its share price.
The decision to halt the 740-megawatt project comes as the company "tries to dispel uncertainty regarding its profitability," Endesa said in a statement.
Endesa said it evaluated adapting Punta Alcalde to make it a "profitable and technologically sustainable project," but that the needed modifications would require important changes to the project's environmental permit, which could prove difficult for regulatory approval.
Punta Alcalde has been welcomed by energy-hungry miners in the world's No. 1 copper producer, but has faced legal battles and fierce opposition from local Chilean communities, which decry the use of coal and say the Huasco area is already saturated with industry.
In a separate filing with the local SVS securities regulator, Endesa said it had provisioned $22 million for Punta Alcade and $121 million for its HidroAysen power project, warning the measure would impact its 2014 earnings.
Following the news, Endesa's shares ended 3.26 percent lower.
Endesa is scheduled to publish its 2014 results later on Thursday.
Regarding the nearly $9 billion HidroAysen project, a joint venture with Colbun, Endesa said it was uncertain if it would be able to recover the investments it had already made, "as this depends on court decisions and (the government's) Energy Agenda, which the company can't foresee."
The controversial 2,750-megawatt dam complex had its permit canceled in June by a ministerial committee after strong opposition from environmentalists who feared it would wreck pristine valleys in Chile's wild south.
In August, HidroAysen appealed the cancellation of its permit to an environmental court, signaling it was ready to put up a fight.
Endesa, which generates and distributes electricity in Argentina, Brazil, Chile, Colombia and Peru, is controlled by energy firm Enersis, the Latin American unit of Italian utility Enel. (Reporting by Anthony Esposito; Editing by Chris Reese and Alan Crosby)