OLD TOWN, Maine (AP) -Conservationists said Thursday they are moving forward with plans to remove two dams and install a fishway at a third to reopen hundreds of miles of Maine river habitat to Atlantic salmon and other sea-run fish.

The project, financed with $25 million in public and private money, calls for the elimination of the Veazie and Great Works dams and the construction of a fishway at the Howland Dam along the Penobscot River. In return, Allentown, Pa.-based power producer PPL Corp. will be allowed to increase production of electricity at other dams along the river.

Besides the PPL Corp. (NYSE: PPL), the project involves the Penobscot Indian tribe, seven conservation groups and state and federal agencies, whose representatives joined Gov. John Baldacci on Thursday to announce the purchase of the three PPL dams.

By exercising an option to buy the dams a year ahead of its expiration, project backers are avoiding a $1 million increase in the dams’ purchase price, said Laura Rose Day, executive director of the Penobscot River Restoration Trust. The trust has also initiated the permitting process and completed preliminary designs for dam removal and bypass construction.

An agreement allows PPL to maintain virtually all of the power it produces along the river by increasing generation capacity at three dams and re-powering a dam at Orono, also along the Penobscot. PPL will also have an opportunity to recycle turbines at the three dams to be decommissioned in order to increase generating capacity at the remaining dams.

PPL will enhance fish passages at four dams, including installation of a fish ladder at the Milford dam, which will become the first dam on the river.

The Penobscot River Restoration Project, which was first announced in 2004, will reopen nearly 1,000 miles of river habitat to Atlantic salmon, American shad, river herring and seven other species of migratory fish, partners in the effort said.

Return of healthy fish stocks will provide food for eagles, ospreys, herons other fish-eating birds, and for predatory fish such as cod. Supporters also said the dam’s removal will enhance the river’s natural flow, improving water quality. Riverfront communities will reap benefits of closer commercial and recreational ties to the river, they added.

Chief Kirk Francis of the Penobscot Indian Nation said opening of the waterway “will revitalize a significant part of our culture and bring back health to our sacred river. We are so grateful to all the people who are helping to make this project a reality.”

The Penobscot River project continues a pattern of dams removals in northern New England.

The removal in 1999 of the Edwards Dam, which had blocked the Kennebec River in Augusta for more than 160 years, was held up as a national model by environmentalists who want to see more dams removed. In Winslow, the Fort Halifax Dam, which had blocked a major tributary of the Kennebec upstream from Augusta, was recently torn out.

A New Hampshire dam’s removal will help migratory fish reach their natural upstream spawning grounds.

The unused Merrimack Village Dam at the mouth of the Souhegan River will be removed over the next two weeks. Once the dam is removed, fish will be able to reach spawning grounds for the first time in three centuries. Officials celebrated the event Thursday. Pennichuck Water Corporation owns the dam.

Financing for the first phase of the latest Maine project was accomplished through a $10 million private capital campaign and securing $15 million in federal funds. In the second phase, the trust will seek up to $30 million more, also from a mix of public and private sources.

PPL Corporation controls more than 11,000 megawatts of generating capacity in the United States and sells energy in key U.S. markets.

AP-ES-08-21-08 1434EDT