UPDATE 2-Rescued Areva faces uncertain future as nuclear fuel group

(Adds detail on strategy, nuclear fuel business)

PARIS, June 4 (Reuters) - France’s Areva faces an uncertain future as a specialised nuclear fuel supplier, as a state rescue moves its core nuclear reactor activities to its utility customer EDF.

Shares in the state-owned firm briefly rose almost 6 percent on Thursday after the government said late on Wednesday it would recapitalise Areva and approved EDF’s plan to take over Areva’s reactor unit.

The government plan unwinds Areva’s much-vaunted model of an integrated nuclear group that mines and enriches uranium, produces nuclear fuel, builds reactors and recycles spent fuel.

Created fifteen years ago from the nuclear fuel group Cogema and reactor builder Framatome, Areva had ambitions to sell as many as 16 of its massive EPR reactors to energy-hungry developing countries.

But it has not sold a reactor since 2007 and the four it did sell have been plagued by delays and cost overruns. More than two decades after it was designed, not a single EPR is in operation today.

Still, the French government said it hopes an EDF-led nuclear industry could win the export contracts that have proved so elusive for Areva.

“The French camp must work together abroad,” Economy Minister Emmanuel Macron told France Info radio on Thursday.

In light of French President Francois Hollande’s pledge to reduce French power generation’s reliance on the atom to 50 percent by 2025 from 75 percent, and with EDF banking on extending the life of its 58 reactors by at least 10 years, Areva has no market at home.

The only way for France to keep its nuclear industry alive - and the more than 200,000 jobs it provides - is to export. Hence the government support EDF enjoys for its project to build EPRs at Hinkley Point in Britain.

Keeping its nuclear industry alive is also crucial if France wants to be able to replace its first ageing reactors in a decade or so.

Nuclear energy is broadly accepted by the French population and backed by its main political parties. France is also a leading supporter of research into fourth-generation reactors, on which it spends hundreds of millions of euros.

Areva’s first chief executive Anne Lauvergeon, whose strategies have been widely criticised, described Areva’s strategy as the “Nespresso” model, under which it would sell reactors with a modest margin but earn big on the nuclear fuel - the coffee - it would sell to captive customers.

But the EPR, designed with Germany’s Siemens, turned out to be too big, too complex and too expensive for the emerging markets where the growth in nuclear is, as most developed nations now focus their energy investments on renewables.

Already weakened by a massive loss on an African uranium mining investment gone awry and billion-dollar writedowns on its fixed-price Finnish reactor, Areva did not have the financial reserves to outlast the order drought caused by the 2011 Fukushima disaster.

Four years of losses have eaten up the last of its equity capital and left Areva virtually bankrupt, protected only by its state shareholder, which owns 87 percent.

Luc Oursel, who briefly ran Areva after Lauvergeon, said Areva’s integrated model was what had kept it alive, as maintenance services and fuel sales to the world’s more than 400 reactors made good the money lost building reactors.

Last year Areva earned 3.1 of its 8.3 billion euro turnover from reactors and services, with 1.3 billion coming from uranium mining, 2.2 billion from enrichment and fuel, and 1.5 billion from spent fuel reprocessing.

Much diminished without the prestigious but risky reactor unit, a fuel-focused Areva will still have sales of around 5 billion euros and a huge order book.

Despite losing nearly five billion euros last year, the firm had orders worth more than five years’ sales, mainly due to its fuel operations.

The government has given EDF and Areva a month to sort out crucial details.

Banking, industry and government sources told Reuters that Areva might keep a 25 percent stake in its former reactor business, and that gas utility Engie may want to buy Areva’s international reactor maintenance services.

A source familiar with the situation said that the closing of the deal would take between 12 and 18 months. (Additional reporting by Benjamin Mallet and Matthieu Protard, editing by William Hardy)