UPDATE 2-France's EDF feels impact of industrial slowdown

* Power demand from French industry starts to fall

* EDF chief unsure on Constellation bid success

* Thinks electricity prices should reflect real cost (Adds extra quotes, Constellation, aluminum plant)

By Benjamin Mallet

PARIS, Dec 10 (Reuters) - France's biggest electricity provider said on Wednesday it has started to see hard evidence of industrial slowdown, as the government reported a record drop in factory output in the eurozone's second biggest economy.

The head of state-controlled Electricite de France (EDF.PA) told parliamentarians industry was cutting back on electricity use by an average of several percentage points.

"We are beginning to see signs of a slowdown in industrial consumption, but not in household consumption," EDF Chief Executive Pierre Gadonneix told the National Assembly (lower house) finance commission.

He also said he was "not sure" that an offer by EDF to buy some of the assets of U.S. power company Constellation Energy Group (CEG.N) would be accepted.

Constellation said on Monday it would begin talks with EDF but had not altered its recommendation that shareholders vote for a rival offer by Warren Buffett's MidAmerican Energy Holdings, a unit of Berkshire Hathaway Inc (BRKa.N) (BRKb.N).

Gadonneix's testimony coincided with figures showing French industrial production had posted its largest annual fall on record in October, dragged down by the struggling car industry.

Output fell 7.2 percent on an annual basis, the largest drop since January 1991 when the series began, national statistics office INSEE said.

Output in the troubled car industry tumbled 14.3 percent, the largest decline since August 1999.

This month, Rio Tinto Alcan, the aluminum branch of global miner Rio Tinto (RIO.L) (RIO.AX), has cut production at two energy-intensive French plants. [nLA738279]

REAL COST

Gadonneix said the financial crisis has not eroded his company's long-term outlook.

He confirmed that EDF would invest 8 billion euros in 2009 and reaffirmed cost-savings that would boost earnings before interest, taxes, depreciation and amortization by 1 billion euros annually within three years.

A 4 billion euro project to build a new-generation European pressurized reactor at Flamanvile in northwestern France is "going well," Gadonneix said, adding he hoped a second such plant would be approved.

President Nicolas Sarkozy had outlined plans for a second plant in July but some energy specialists argue it is not needed.

Some 80 percent of French needs are met by nuclear plants. EDF is the world's biggest single nuclear power producer.

The 4 billion euro cost for Flamanville is 20 percent more than the original budget, and EDF is seen as pushing for an increase in regulated tariffs that are below market prices -- a politically sensitive topic as consumers face recession.

"It seems good to me that electricity should be sold in line with its cost ... and this will move progressively towards the cost of power stations we are building today," Gadonneix said. (Additional reporting by Sybille de la Hamaide and Tim Hepher, editing by Gerald E. McCormick)