UPDATE 2-French government backs Solvay's Clamadieu as new Engie chairman

* Engie board set to meet Tuesday to propose new chairman

* French finance minister has met with Solvay’s Clamadieu

* Clamadieu to replace Engie founder Mestrallet who retires (Adds detail, background)

PARIS, Feb 12 (Reuters) - The French government backs Jean-Pierre Clamadieu, chief executive of Belgian chemical group Solvay, to become chairman of gas and power group Engie, a source close to the French finance ministry said on Monday.

The source said Finance Minister Bruno Le Maire had met with Clamadieu on Monday and that the government, which owns 24.1 percent of Engie’s capital, would support Clamadieu if he were to be proposed as chairman at a board meeting on Tuesday.

A second source familiar with the situation said “there was a good chance” Clamadieu, a French national, would be chosen on Tuesday to succeed Gerard Mestrallet, who will retire in May.

Mestrallet built up the global utility through a series of mergers and acquisitions over the past two decades.

An Engie spokesman confirmed that the utility company’s board will meet on Tuesday, but declined comment on a report in French newspaper Le Figaro saying the board was set to propose Clamadieu, 59, for the role.

Clamadieu’s familiarity with Belgium would be a boon to Engie, which owns Belgium’s power market leader Electrabel and operates the country’s two nuclear power plants.

His appointment, however, would be seen as a blow for Engie Chief Executive Isabelle Kocher, who had wanted to combine the CEO and board chair roles after Mestrallet’s departure.

Kocher, who was appointed CEO in May 2016 after CEO and board chairman Mestrallet gave up the CEO role, has led a 15 billion euro ($18.4 billion) divestment plan to switch Engie away from fossil fuels and focus on power grids, renewable energy and energy services.

Last month, she said that if a “compatible” new board chairperson were to join her and believed in her strategy, she would be delighted.

Clamadieu, who became CEO of Solvay in May 2012, is a graduate of one of France’s elite “grandes ecoles” graduate schools. He worked at the French industry ministry in the 1980s before joining chemical firm Rhone-Poulenc.

In 2003, Clamadieu was appointed chief executive of French specialty chemicals group Rhodia, which merged into Solvay in 2011.

Solvay declined to comment on Clamadieu’s possible appointment as Engie chairman. Insiders say that Clamadieu could well remain Solvay CEO if he is appointed Engie chair.

Engie, which changed its name from GDF Suez three years ago, was formed in 2008 from a merger between state-owned Gaz de France and water and waste utility Suez as a defensive move to thwart a bid by Italian utility Enel.

With just 7.3 gigawatts (GW) of its 118 GW power generation capacity based in France, Engie is one of the world’s most international utilities, but its debt-fuelled expansion has weighed on it share price.

From a high of more than 44 euros in 2008, Engie stock slid to a low of 10.9 euros in early 2017. It then recovered to 15 euros late last year but slid back below 13 euros in the global market rout of the past two weeks.

It was trading at 12.71 euros, up 0.6 percent, at 1625 GMT on Monday.

According to ThomsonReuters data, Engie’s price to book ratio, at 0.78, is the third-lowest in the Stoxx European utilities index, just ahead of German utilities E.ON and Uniper. ($1 = 0.8149 euros) (Reporting by Benjamin Mallet and Geert De Clercq in Paris and Robert-Jan Bartunek in Brussels; Writing by Geert De Clercq; Editing by Sudip Kar-Gupta and Susan Fenton)