New Zealand’s biggest electricity generator Meridian Energy was granted approval to take more water from the Waitaki River to build the country’s largest hydro-electric project in more than 20 years.

The Environment Court has granted conditional water rights for an underground, 260MW power station on the north bank of the Waitaki River, government-owned Meridian said.

Land-use and construction approvals are still required and an investment commitment is not likely until 2012 at the earliest, chief executive officer Tim Lusk said in an e-mailed statement, reports Bloomberg.

The company has been working on the North Bank plan since 2005, after abandoning a larger project on the same river a year earlier because of planning delays and public opposition.

The project, estimated to cost NZ$900m ($648m) in 2005, will draw water from behind one of the company’s existing dams down a 34km tunnel to an underground power station.

If completed it will be the largest hydro project since the 432MW Clyde dam was opened in 1992.

Meridian operates eight power stations in its Waitaki catchment southwest of Christchurch.