Meridian Energy says it has abandoned plans to dam the Mokihinui River because of Department of Conservation opposition.
Environmental groups are claiming victory for the state-owned enterprise's decision to withdraw the plan for a $300 million hydro-electricity dam on the West Coast river.
In April 2010, Meridian won resource consents to build the dam north of Westport but was preparing for legal appeals from DoC, the Forest and Bird Protection Society and water use groups.
Meridian Energy chief executive Mark Binns says he was confident of winning the case, but faced an even harder hurdle getting DoC to approve the flooding of conservation land.
Mr Binns says DoC made it clear that it saw the river as sacrosanct and nothing the company could offer would replace it.
The project would have been beneficial to the West Coast, but its risks have become too high to spend more money on it, he says.
Forest and Bird is thrilled at the decision, saying it's the win of the decade.
South Island field officer Debs Martin says she was always confident the dam would be stopped, but is relieved not to have fight it out in the Environment Court.
The Green Party says it is fantastic that the Mokihinui River has been saved. Co-leader Russel Norman says it was clear that the energy company was under a lot of pressure with the court process and heat from environmental groups.
Dr Norman says the fact that the electricity market is a bit flat would also have played a role in Meridian's decision.