UPDATE 1-Edison sees gas supply talks boosting 2012 earnings

* Writedowns in 2011 total 928 mln euros

* Net loss 871 mln euros vs 21 mln euro profit yr earlier.

* Gas contract renegotiation with Algeria in 2013 - CEO

* Shares rise 0.4 pct, underperforming sector (Releads, adds management comment, shares)

MILAN, Feb 14 (Reuters) - Edison, Italy's No. 2 utility, is counting on the renegotiation of major gas supply contracts to support earnings growth this year after it swung to a net loss in 2011 following a series of writedowns on assets.

Edison said in a statement on Tuesday a writedown on power assets and a writeoff on its Edipower unit , together totaling 928 million euros, left it with a net loss of 871 million euros ($1.15 billion).

Edison, which has both gas and power business, is jointly owned by France's EDF and a group of Italian investors led by regional utilities A2A and Iren.

The shareholders recently agreed a revamp of the utility to give full management control to EDF. As part of the deal, which still needs to be finalised, the Italian investors will receive assets of power generating company Edipower, which is 50 percent controlled by Edison.

The sale of Edipower will lighten Edison's debt burden by some 1.1 billion euros.

"The Italian market is extremely difficult and an oversupply of gas and power overcapacity continue to shrink margins. I don't see any improvement in margins next year," Edison CEO Bruno Lescoeur said in a conference call.

Edison has seen its margins in the gas business undermined by its long-term gas supply contracts which are priced higher than spot prices.

Lescoeur said he expects renegotiation of the group's gas contracts with Libya and Qatar to be concluded in the second half of this year, while talks with Algeria will not be concluded until 2013.

When asked if the group expected core earnings in 2012 to be in line with 2010 at around 1.2-1.3 billion euros Lescoeur said "you understand well".

Earnings before interest, tax, depreciation and amortisation (EBITDA) for 2011 fell 26.7 percent to 1.003 billion euros, above a Thomson Reuters I/B/E/S consensus of 910 million euros.

The results confirmed what a source told Reuters on Monday.

EDF plans to use Edison, which produces and sells electric power, natural gas and crude oil, as a platform to develop its gas business in Italy.

At 1125 GMT Edison shares were up 0.36 percent while the European utility index was 0.55 percent higher. ($1 = 0.7566 euros) (Reporting By Stephen Jewkes; Editing by Hans-Juergen Peters)