MAE SOT, Thailand, Sept 3 (Reuters) - A grenade attack on the site of a controversial hydropower dam in Myanmar's insurgency-infested Karen State killed a Thai worker and prompted dozens to flee, a Thai army officer said on Monday.

The man, a 50-year-old surveyor, was killed late on Sunday when one of two grenades thrown into a worker's camp exploded, the officer, who declined to be identified, told Reuters.

The camp was in a village in Karen State, where the Karen National Union (KNU) has waged a guerrilla war against the government since 1949.

Under escort of Myanmar troops, the 42 employees from the state-owned Electricity Generating Authority of Thailand (EGAT) were due to arrive at the Thai border town of Mae Sot late on Monday, the officer said.

The KNU denied responsibility for the attack, which it said was orchestrated by Myanmar troops with the intent of discrediting the group.

"How could we do it when it is an area tightly secured by Myanmar troops," KNU secretary-general Mhan Sa La Pah told Reuters. "They want the Thais to hate us."

The victim was the second EGAT employee killed in 17 months since construction of the 1,000-megawatt Hutgyi hydropower project began along the Salween River began amid opposition from environmentalists and ethnic groups.

In May 2006, an EGAT surveyor lost his leg after stepping on a landmine and later died in a Bangkok hospital. The KNU denied responsibility for the incident.

Thai and international environmentalists urged Thailand's post-coup, army-appointed government earlier this year to halt construction of the five dams, which have a combined capacity of 14,7000 megawatts, until the environmental impact was properly assessed.

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