* 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,
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
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,"
Financial terms of the latest deal, announced by Fennovoima,
were not disclosed. E.ON was not immediately available for
($1 = 0.7495 euros)
(Additional reporting by Christoph Steitz in Frankfurt; Editing
by Ritsuko Ando and Helen Massy-Beresford)