* Finland claims hold up EDF takeover of Areva unit
* French government wants resolution in a month
* Flamanville weak spots potentially bigger threat
* Hinkley Point too crucial for EDF to abandon
By Geert De Clercq and Benjamin Mallet
PARIS, Jan 28 Intractable problems at two
nuclear plants under construction in France and Finland threaten
more delays to EDF's plan to build four nuclear
reactors in Britain.
The state-owned French utility announced an 18 billion pound
($26 billion) project in October to build two Areva-designed
European Pressurised Reactors (EPR) at Hinkley Point,
southwestern England, with Chinese partner CGN.
The two companies also plan to build two more EPRs at
Sizewell in eastern England.
The plan was first announced in 2013, but an investment
decision has been put off repeatedly as EDF struggles to find
partners and funding.
Now it is being delayed by EDF's planned takeover of the
reactor arm of Areva, which itself is being held up by EDF's
refusal to take on financial responsibility for delays and cost
overruns at an EPR Areva is building in Finland.
Weak spots discovered in a second EPR being built in France
could potentially cause even bigger problems, experts say.
On Wednesday, the French state came to the rescue of Areva -
virtually bankrupt after four years of losses - with a five
billion euro capital increase and EDF agreed on a provisional
valuation of 2.5 billion euros for the reactor business.
Areva shares surged as much as 35 percent on Thursday.
But EDF also said it would not make a binding offer for
Areva's reactor arm until it is "completely immunised" against
any risks related to Areva's Olkiluoto 3 (OL3) reactor project
OL3 is nearly a decade behind schedule and Areva and its
customer TVO claim billions from one another in an arbitration
suit begun in 2008.
French Economy Minister Emmanuel Macron said last week he
and his Finnish colleague had given the companies a month to
find an agreement.
But the Finnish government has no say over privately owned
TVO, whose chairman said this week that it does not want to see
Areva's OL3 responsibilities shifted to another legal entity, as
A potentially even bigger problem for EDF's British plans
are the weak spots found in the reactor vessel of the second
EPR, under construction in Flamanville, on France's west coast.
Flamanville is years behind schedule and its budget has
swollen from 3 billion to 10.5 billion euros. In April 2015
French nuclear regulator ASN said "very serious anomalies" had
been found in its reactor vessel.
ASN said last week it would decide by the end of this year
whether the vessel could remain in the plant.
A source familiar with the situation told Reuters that
before finalising Areva's reactor arm takeover, EDF wants
guarantees not only for OL3, but also for Flamanville.
"EDF's offer depends on total immunisation against the OL3
case and the Flamanville vessel," the source said.
Experts say the Flamanville risk is bigger than OL3 because
if the spots cannot be fixed, EDF would have to break the vessel
out of the nearly finished reactor building.
A source at the French economy ministry said the Flamanville
issues would not be an issue in the EDF-Areva talks.
"Immunisation against Flamanville is not a topic, because
EDF is the client," the source said.
Experts are not so sure about that.
"It is difficult to imagine that EDF would make a final
engagement decision on Hinkley Point without knowing what is
going to happen with Flamanville and Taishan," said Mycle
Schneider, lead author of World Nuclear Industry Status Report.
The vessels of two EPRs being built in Taishan, China were
manufactured by the same supplier as that of Flamanville. No
problems have so far been reported with the vessels there.
In its statement on Wednesday, EDF said nothing about
Flamanville, but in an internal document seen by Reuters, EDF
does link the Flamanville flaws to its newbuild plans.
In a 2016-18 strategy document for its works council, EDF
lays out a plan to complete 10 EPRs by 2030, including four in
the UK and two "New Model" EPRs in France.
"The success of Flamanville and good progress of the Hinkley
Point C project are the two necessary prerequisites" for
building the New Model EPRs, the document stated.
Whether or not EDF gets guarantees for Flamanville, a
worst-case scenario for it would put another dent in the balance
sheet of EDF, which already needs to borrow money every year
just to pay its dividend.
But industry experts say that while Hinkley Point will
stretch EDF to the limit, it is unthinkable it would abandon the
project, as it is essential for keeping France's nuclear
industry alive in the coming decade before EDF starts renewing
its ageing French nuclear fleet.
EDF chief executive Jean-Bernard Levy said in October a
final investment decision on Hinkley Point would come "soon",
which he repeated in a newspaper interview on Sunday, but the
company has let many earlier decision deadlines slip.
EDF's next board meeting comes ahead of the release of its
2015 earnings on February 16.
($1 = 0.6990 pounds)
(Additional reporting by Leigh Thomas; editing by Adrian Croft)