UPDATE 1-Navajo venture developing 500 MW of wind power

(Adds financial details, interview details with Navajo spokesman, byline)

By Timothy Gardner

NEW YORK, March 27 (Reuters) - The Navajo Nation, which has struggled for years to build a coal-fired power plant, said on Thursday it has formed a joint venture with a Boston company to develop 500 megawatts of wind energy on its land in the U.S. West.

Navajo Nation President Joseph Shirley signed an agreement with Joseph P. Kennedy II, the chairman and president of Boston-based Citizens Energy Corp, to develop the $350 million to $400 million project.

The agreement forms a joint venture between Citizens, a global developer of renewable energy and power transmission, and Dine Power Authority, the Navajo's wholesale energy enterprise. Construction of the wind farm is planned to begin in 2010 or earlier.

Wind power "can bring economic prosperity for the Navajo people and build our energy independence while providing jobs and other benefits for the Navajo Nation," Shirley said in a release.

Under terms of the agreement, the Navajos would have an ownership stake in the project development company and be able to invest additional equity in the project, eventually acquiring a majority ownership stake, according to the statement from the Washington office of the Navajos.

Citizens Energy has also agreed to reinvest a portion of the profits from the project on the Navajo Nation, it said.

Early estimates anticipate the Dine Wind Project could produce between $60 million and $100 million in total revenue for the Navajo Nation over the lifetime of the project, not including the jobs and environmental benefits of wind energy, the Navajo statement said.