SANTIAGO, Oct 22 (Reuters) - The Chilean government gave strong backing for the first time on Wednesday to a controversial dam project under construction in a valley near Santiago, which angry local protesters have said will hurt their water supply.
The-531 megawatt Alto Maipo hydroelectric project, a joint venture between local energy firm AES Gener and London-listed Antofagasta Minerals, has faced strong opposition from environmentalists and local communities.
But Finance Minister Alberto Arenas told a local business forum that the project had complied with all rules and received its environmental permits.
"This project is fundamental for energy development and supply as it uses technology that will help lower prices," he said.
Chile, which has little in the way of its own hydrocarbons, is struggling with high power prices and the need to balance growing energy demands with increased opposition to projects seen as environmentally damaging.
Protesters against Alto Maipo, which is scheduled to start operations in 2018 to 2019, have held a number of noisy demonstrations in the capital.
They say the project in the Maipo Valley southeast of the capital will cut off lake water that flows to the river Maipo, affecting the water supply, farming and tourism. (Reporting by Felipe Iturrieta; writing by Rosalba O'Brien; editing by Matthew Lewis)