UPDATE 1-Italy's Edison, Hellenic Petroleum in power JV

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MILAN, July 3 (Reuters) - Italy's second-biggest power utility Edison (EDN.MI: Quote, Profile, Research) and Greece's biggest refiner Hellenic Petroleum (HEPr.AT: Quote, Profile, Research) agreed on Thursday to set up a joint venture to become the second-biggest power operator in Greece.

The 50-50 joint venture aims for a generating capacity of more than 1,500 megawatt which is equal to about 12 percent of the fast growing Greek market, Edison said in a statement.

The joint venture would be also active in power trading and marketing, may invest in renewable energy in Greece and consider opportunities in power generation and trading in the Balkans.

"With this transaction, Edison broadens the scope of its electric power operations to include Greece, a market that has been growing at a faster rate than the average for the European Union," Edison CEO Umberto Quadrino said in the statement.

Under the deal, Hellenic Petroleum would fold into the new joint venture its T-Power SA subsidiary which owns a 390 MW gas-fired combined-cycle power plant in Thessaloniki, which is the first private-sector power plant built in Greece.

Edison would contribute with its 65-percent equity interest in Thisvi SA, which is building a 420 MW combined-cycle plant in Thisvi, in central Greece, as well as projects currently under study to build other power plants.

T-Power SA and Thisvi SA would later be merged into a single company controlled by the joint venture.

Thisvi's current minority shareholders, Hellenic Energy & Development and Halcor, would have the right to buy shares in the company resulting from the merger to keep an overall equity interest of 25 percent. Alternatively, they would have the option to sell their equity interests to the joint venture.