UPDATE 1-Finland's Fennovoima to drop Areva from reactor talks
* Areva to continue talks on smaller-sized reactors
* Fennovoima to make announcement on Monday
* Source says Fennovoima to continue talks with Toshiba only (Adds French industrial source, background)
HELSINKI/PARIS, Feb 24 (Reuters) - French nuclear group Areva said it expects to be dropped from talks to supply its high-power reactor for Fennovoima as the Finnish consortium has changed its plans following the exit of its main shareholder.
The move, unconfirmed by Fennovoima, would leave Japan's Toshiba in negotiations to supply a large reactor for the site in Pyhajoki, in northern Finland.
A spokeswoman for Areva Finland said on Sunday Fennovoima had started to look at other options after its biggest shareholder, German utility E.ON, last year decided to exit the project, estimated to cost 4 to 6 billion euros ($5.3-7.9 billion).
Fennovoima's remaining owners, some 60 Finnish companies, have said they would take on E.ON's 34 percent stake, but there are still concerns over the project's financing and know-how.
Fennovoima, which was due to choose between Areva and Toshiba this year, has asked Areva to hold talks on a smaller reactor, however, the Areva Finland spokeswoman said.
"We've understood that they are continuing talks (about a large reactor) with only one potential supplier now, but we would continue negotiations about smaller-sized reactors," she told Reuters.
It was not clear what type of reactor that would be as Areva currently only builds one model, the 1,600 megawatt European Pressurized Reactor (EPR), one of the world's biggest reactors.
Areva does offer a smaller reactor, the 1,100 megawatt ATMEA reactor, in a joint venture with Mitsubishi Heavy Industries , but that model has not been sold anywhere.
A Fennovoima spokeswoman said the consortium would make an announcement on Monday.
A French industrial source told Reuters in Paris that Fennovoima will announce the closure of the tender process and will start discussions with Toshiba about a high-power reactor.
The proposed Pyhajoki plant is the first reactor site to be announced after the Fukushima disaster in Japan and is aimed at providing cheap energy to Fennovoima consortium shareholders including stainless steel maker Outokumpu, retailer Kesko and units of Swedish metals firm Boliden . Production is due to start in the 2020s.
On Saturday, Rosatom said Fennovoima had also contacted the Russian state-owned company about supplying a reactor.
"The situation is not clear, with the exit of E.ON, the announcement of talks with Toshiba but also with the Russians," a spokesman for Areva France told Reuters.
Areva, with German partner Siemens, is already building a 1,600 megawatt nuclear reactor in Finland for another utility group, Teollisuuden Voima (TVO), on Olkiluoto island, some 230 km northwest of Helsinki.
The EPR that Areva is building on the Olkiluoto 3 site is years behind schedule and billions over budget and Areva and TVO are in dispute about who is to blame.