* Fortum ends deal with Areva-Siemens due to delays
* Rolls-Royce to carry on with modernisation
* Fortum wants new plant permit from next govt (Adds Fortum comments, background)
By Jussi Rosendahl and Sakari Suoninen
HELSINKI, May 21 (Reuters) - Finnish utility Fortum has terminated a deal with engineering groups Areva and Siemens and picked a rival to carry out modernisation work on a nuclear plant, having decided the project would otherwise take too long.
State-controlled Fortum said on Wednesday it had chosen Britain's Rolls-Royce to deliver the next phase of automation systems for the Loviisa plant in southern Finland, in a project stretching through 2018.
"When we started the second phase of the modernisation (with Areva-Siemens), it appeared that the implementation would have been taken too long," said Tiina Tuomela, Fortum's nuclear power executive.
She did not specify the reasons for the delays to work on the Loviisa reactors, which meet about a tenth of Finland's power needs and generated 8 terawatt hours (TWh) in 2013.
But she said the decision to bring in Rolls-Royce had nothing to do with problems at the Olkiluoto 3 nuclear plant, which has been hit by repeated delays and soaring costs and where Areva-Siemens was also the main supplier.
A spokeswoman for Areva Finland said: "We have agreed with Fortum to discontinue the project. It wasn't about our technology, they only decided to look for a different solution". She declined to elaborate.
The deal value was not disclosed, but Fortum invested 60 million euros ($82 million) in Loviisa last year, and it has said such investments will grow in the future. The Finnish company gave no reason for picking Rolls-Royce but noted its technology was installed in more than 200 nuclear reactors across 20 countries.
Loviisa's two nuclear reactors were made in the former Soviet Union, but have Western-made control and automation systems. Reactor 1 has a license to operate until 2027 and reactor 2 until 2030.
Previous work on the automation systems managing the two reactions was completed by Areva-Siemens in 2009 and Fortum wants to modernise the systems to ensure they keep running safely in coming years.
The Finnish group also hopes to develop a new reactor at Loviisa, but has this has so far been rejected by Finnish legislators in favour of rival initiatives - both of which have lately suffered setbacks.
The current five-party ruling coalition, including the Green party, has said it will not approve new nuclear permits, but Tuomela said Fortum hoped to get a go-ahead from the next government, due to be formed next year.
"It is clear we would like to continue and develop nuclear operations in Loviisa," she said.
Rolls-Royce, best known for making aero engines, said last week it was in talks to sell to Siemens its unit making equipment for the oil and gas industry and power-generation gear for utilities, but this excluded its activities in the nuclear industry.
$1 = 0.7302 Euros Editing by David Holmes