SANTIAGO - Chilean state copper giant Codelco said on Friday it had reached a deal with GDF Suez to merge electricity generation assets in northern Chile under one company.

World No.1 copper producer Codelco said in a statement that the French utility firm would pay it $172,5-million under the deal. Codelco will control a 40 percent stake in the merged energy firm, with GDF Suez taking a 52,4% stake and small investors the 7,6% balance.

Under the deal, electricity generating companies jointly owned by Codelco and GDF Suez, will be wrapped into generator Edelnor, whose shares jumped as much as 6 percent following the announcement.

The newly-merged company will comprise Electroandina, Gasoducto Nor Andino Argentina SA, Gasducto Norandino and the Central Termoelectrica Andina SA thermoelectric plant under construction.

GNL Mejillones, which belongs to both Codelco and GDF Suez, and is building a liquid natural gas terminal in the north, was not part of the merger.

The new Edelnor will have a total capacity of 1 795 MW, equal to around half of the capacity of the regional grid, or SING, that supplies Chile's mine-rich north.

The supply of energy to the far northern desert Atacama region where Codelco holds most of its mines is key to the company's output, which is expected to increase in 2009 after years of decline.

"Codelco's goal in the merger is to obtain greater value for its assets in those electricity firms by creating a liquid, listed company, with greater visibility and financing capacity," the state run miner said in a statement.

Codelco said last month its copper production rose 16 percent in the January-September period compared with a year earlier to 1,21-million tonnes. Including Codelco's 49 percent stake in El Abra mine, production totaled 1,27-million tons. Freeport-McMoran controls El Abra.