UPDATE 1-Akela Pharma to repay Tekes about 956,000 euros

* Akela to repay Tekes 956,000 euros and interest

* Repayment to be made in quarterly instalments over 4 yrs

* Akela to classify C$1.5 mln provision as long-term debt

June 30 (Reuters) - Canada's Akela Pharma Inc (AKL.TO) said it will pay Finnish funding agency Tekes about 956,000 euros ($1.4 million) plus interest to settle a demand for repayment of certain grants.

Akela said the repayment will be made in equal quarterly instalments during a period of four years -- starting from September 2010 to September 2014.

As a result of this settlement, Akela reclassified its C$1.5 million ($1.3 million) provision for probable losses associated with Tekes' claim during the first quarter of 2009 as long-term debt, Akela said.

Akela entered into agreements with Tekes in 2004 and 2005 that provided for funding in the form of grants and loans to support Akela's product development activities.

Tekes demanded a repayment of the grants after Akela decided to downsize its Finnish operations in 2007.

Earlier this year, Akela said a Finnish court ruled against its appeal to overturn Tekes' demand for repayment.

Akela shares closed at 25 Canadian cents Monday on the Toronto Stock Exchange. ($1=.7097 Euro) ($1=1.153 Canadian Dollar) (Reporting by Ashutosh Joshi in Bangalore; Editing by Himani Sarkar)