* Power business sold to Italy fund for $1.1 bln
* Bid finance concerns had capped price - analyst
SEOUL, Oct 7 (Reuters) - Shares in Doosan Heavy Industries & Construction rose sharply after the South Korean firm lost a billion-dollar race to buy an Italian power business, easing investor fears that it might have to offer new stock to fund a deal.
Doosan Heavy had been in contention with an Italian fund and German industrial conglomerate Siemens to buy Genoa-based Ansaldo Energia and access to the Italian firm's gas turbine technology.
But Ansaldo Energia's parent company Finmeccanica said on Friday it had agreed to sell all of the power business to the state-backed Italian fund for 777 million euros ($1.06 billion).
Doosan Heavy shares ended up 4.1 percent to 46,200 Korean won on Monday, valuing Doosan Heavy at about $4.6 billion, while the Seoul benchmark KOSPI index was nearly flat.
"Investors were previously concerned that Doosan Heavy would issue new shares to fund the deal," said Choi Gwang-shik, an analyst at LIG Investment & Securities.
In a filing, Doosan Heavy said it will now seek to develop commercial ties with Ansaldo Energia instead. Its biggest acquisition so far remains its purchase of Czech turbine maker Skoda Power for 450 million euros back in 2009.
Han Young-soo, an analyst at Samsung Securities, said in a report that uncertainty about how Doosan Heavy would finance a deal has capped gains in the shares for the past three months.
"The acquisition could have offered Doosan the opportunity to secure core technology in gas turbines. But for the short term, the news may have a positive impact on the company."