* E.ON announced sale of 34 pct stake in Oct
* Reactor aims to produce cheap electricity to owners
* Fennovoima to pick reactor supplier this year (Adds Outokumpu comment, analyst's cautious view on plan, recasts)
By Terhi Kinnunen and Jussi Rosendahl
HELSINKI, Feb 15 A group of Finnish firms has taken on German utility E.ON's 34 percent stake in nuclear consortium Fennovoima, in a bid to keep plans for a new reactor in northern Finland on track.
E.ON said in October it was exiting all operations in Finland to raise funds to cut debt, sparking doubts over plans for the proposed reactor in Pyhajoki.
Fennovoima said on Friday that Voimaosakeyhtio, a group of some 60 Finnish utilities as well as industrial companies including Outokumpu, Rautaruukki and Talvivaara, will now own the entire reactor project.
The biggest partner in the project, originally estimated to cost around 4-6 billion euros ($5-8 billion), will be stainless steel firm Outokumpu with a stake of 15 percent.
The project aims to provide cheap energy to the owners, which also include retailer Kesko and subsidiaries of Swedish metals firm Boliden.
While other European countries are trying to phase out nuclear power, Finland is going ahead with its plans to build more in a bid to reduce carbon emissions and curb its dependence on electricity imports.
Finland's long, cold winters require high energy consumption and its forest and steel sectors rely on cheap and stable electricity.
Fennovoima's reactor is expected to start electricity production in the 2020s, and the consortium is due this year to choose between potential suppliers Areva and Toshiba .
Voimaosakeyhtio members could, theoretically, avoid investing more money in the project by taking on more investors. Voimaosakeyhtio Chief Executive Pekka Ottavainen said the existing members do not need to invest more immediately.
"They can decide if they want more owners or if they want to change their own stake," he said.
But Friday's move suggested there were currently few others willing to invest in the project. Fennovoima's Chief Executive Juha Nurmi had said in November that the potential supplier could invest in the project.
Analysts have said plans for the reactor were looking less financially promising than originally expected, partly due to a decline in electricity prices but also due to delays at Olkiluoto 3, another Finnish reactor in the making.
Finnish utility Teollisuuden Voima (TVO) said earlier this week that commercial production at its reactor Olkiluoto 3 was likely to be delayed to 2016, 7 years later than originally scheduled. TVO and supplier consortium Areva-Siemens have traded accusations over delays and soaring costs.
Juha Kinnunen, head of research at Inderes, said the absence of a nuclear expert in Fennovoima shareholders meant a greater risk of cost and schedule overruns.
"Experience is extremely important. Olkiluoto 3 is a good example of how costs can increase to a whole other level than what was originally planned," he said.
Kinnunen said the cost of taking a bigger stake could put an additional strain on the company, which is already struggling with weak stainless steel prices.
An Outokumpu spokeswoman did not comment on plans for new investors, while confirming its stake had risen to 15 percent from 10 percent.
The company's shares fell 4.7 percent to 0.67 euros by 1020 GMT on Friday. On Thursday it reported a bigger-than-expected quarterly loss of 220 million euros.
"Looking at Outokumpu's finances, I wouldn't be too keen on investing more, although I assume that they don't need to make any payments for this project during the next year or so," Kinnunen said.
Financial terms of the latest deal, announced by Fennovoima, were not disclosed. E.ON was not immediately available for comment.
($1 = 0.7495 euros) (Additional reporting by Christoph Steitz in Frankfurt; Editing by Ritsuko Ando and Helen Massy-Beresford)