Ence's talks on Uruguay plant still open-source

MADRID, April 20 (Reuters) - Spanish pulp, paper and energy group Ence (ENC.MC) has yet to make a decision over its pulp mill project in Uruguay and negotiations with a potential partner were still ongoing, a company source said on Monday.

Argentine daily La Nacion reported on Sunday the company was considering halting the construction of its Punta Pereira mill after failing to find a partner to share a further 1 billion euro ($1.30 billion) investment needed to put the mill into operation.

"Our situation in Uruguay hasn't changed," the source said.

Ence was hoping to find a partner by April 3, La Nacion said.

Portugal's Portucel (PTI.LS) and Finland's Stora Enso (STERV.HE) and UPM (UPM1V.HE) were tipped as potential partners in February when an Ence source told Reuters the company had narrowed its search to four candidates. [ID:nLC418614]

However, talks may have stalled as companies in an ailing European paper sector struggle with their own debts and tight credit, analysts said.

"Ence could be holding out for a last-minute alternative, but financing is going to be tough for anyone," one analyst in Spain said. ($1=.7706 Euro) (Reporting by Jose Rodriguez; Additional reporting by Tracy Rucinski; editing by Simon Jessop)