Hong Kong shares up 23 pct in 2012, China's 1st annual gain since '09

* HSI flat on the day, jumps 22.9 pct in 2012

* CSI300 up 1.7 pct on Monday, up 7.6 in 2012

* Chinese insurers, brokers up, CSRC mutual funds ruling helps

* A-H premium nears 100 parity after A-share Dec outperformance

By Clement Tan

HONG KONG, Dec 31 (Reuters) - Mainland Chinese shares climbed to a six-month closing high on Monday, helping Hong Kong cut early losses as the onshore market closed out a first annual gain in three years helped by strength in brokerages and insurers.

Investors cheered a plan by the China Securities Regulatory Commission to allow eligible securities houses and insurers' asset management units to develop and manage mutual funds in its latest bid to revitalize the sector.

The Hang Seng Index closed flat at 22,656.9, hovering at its highest close since July 2011. Stiff chart resistance is next seen at around 22,800, intra-day highs last seen in July and August 2011. The benchmark jumped 22.9 percent in 2012.

The China Enterprises Index of the top Chinese listings in Hong Kong climbed 0.5 percent on the day and 15.1 percent in 2012. Hong Kong markets shut at midday for the New Year holiday and will resume trading on Wednesday.

The CSI300 of the top Shanghai and Shenzhen listings rose 1.7 percent on the day and 7.6 percent in 2012. The Shanghai Composite Index gained 1.6 percent on Monday and 3.2 percent this year.

This was the first annual gain in three years for the two onshore indexes and the H-share index, and the best year since 2009 for all four benchmarks. Mainland markets are closed for a three-day holiday and resume trading on Friday.

"Investors rotated into Chinese non-bank financial stocks from banking ones today in Hong Kong," said Jackson Wong, vice-president of equity sales at Tanrich Securities.

"Financial reform is a very strong theme and will carry into 2013, but cyclical counters with low valuations will probably lead a rally in the early weeks," said Jackson Wong, vice-president of Tanrich Securities

On Monday, China Life Insurance was the biggest boost to indexes in Hong Kong and China, jumping 5.8 percent to a 20-month high in Shanghai, bringing its 2012 gains to 21.3 percent.

China Life shares climbed 3.1 percent to their highest since August 2011 in Hong Kong, rising 32 percent in 2012. Smaller rival, Ping An Insurance rose 1.9 percent in Hong Kong and 3.4 percent in Shanghai.

The announcement by the China Securities Regulatory Commission was its latest bid to reinvigorate an industry struggling to produce returns for investors and introduce more competition in an already-crowded mutual funds sector.

This follows an announcement last week allowing brokerages to sell subordinated debt and the Chinese central bank pledging to quicken the pace of reforming the financial sector that sent shares of Chinese brokerages soaring last Friday.

Shares of Citic Securities , China's largest listed brokerage, on Monday added a further 2.2 percent in Hong Kong and 1.5 percent in Shanghai. It finished 2012 up 53 percent in Hong Kong and 38 percent in Shanghai.

Tian Di Science & Technology, among 15 stocks added to the CSI300 with effect from Friday, rose 3.1 percent in Shanghai. Datang International Power Generation, among the 15 excluded, slipped 0.3 percent in Shanghai.

EARLY 2012 CYCLICAL RALLY TO REPEAT IN '13?

Despite outshining onshore peers in 2012, offshore Chinese shares finished 2012 way off the highest levels this year, mainly due to the underperformance of some growth-sensitive metal producer counters, which were plagued by inventory-related problems.

Chinese property-to-steel conglomerate Citic Pacific finished 2012 down 17.4 percent after rising by as much as 13.3 percent on the year in February.

Currently trading at a 27 percent discount to its forward 12-month earnings multiple, according to Thomson Reuters StarMine, Citic could see a repeat of its early 2012 rally as investors look to laggard cyclicals in early 2013, particularly if Chinese economic data come in better than expected.

On Monday, Hong Kong shares cut early losses while onshore Chinese markets extended gains after a survey of private factory managers showed activity in China's manufacturing sector hit its fastest pace in December since May 2011.

An improving Chinese economy, along with signs that large institutional investors were returning to the A-share market after several market-boosting measures, has helped onshore markets outperform offshore peers in December.

Chinese fund managers raised their recommended equity weightings in December to a seven-month high with a strong preference toward financial stocks as an improved economic outlook and market performance boosted risk appetite, the latest Reuters fund poll showed.

The CSI300 and Shanghai Composite closed on Monday at their highest since June 20, largely on the back of a surge in December. They soared 17.9 and 14.6 percent this month, their respective best monthly gains since July 2009.

That has helped the Hang Seng Index A/H premium index creep back towards the 100 parity level, closing at 99.4 on Monday, after dipping below that level in late October, wiping out the premium that onshore shares has historically traded over offshore peers.

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S.Korea to restart one of two troubled reactors this week

SEOUL | Sun Dec 30, 2012 11:11pm EST

SEOUL Dec 31 (Reuters) - South Korea will restart one of two nuclear reactors this week after being shut for nearly two months to replace parts which were found to have forged documents, easing power supply concerns as winter bites, the nuclear regulator and operator said.

The State-run Nuclear Safety & Security Commission said in a statement on Monday that it had approved the restart of a 1,000-megawatt (MW) reactor in Yeonggwang county, 300 km (186 miles) southwest of the capital Seoul.

A spokesman at Korea Hydro & Nuclear Power, state-run Korea Electric Power Corp's subsidiary that runs the country's nuclear industry, said the reactor is expected to fully supply power within this week.

South Korea's nuclear sector has been involved in a series of minor incidents and a scandal over forged certificates for parts used in what the government insists are non-essential operations - events that led to the closure of two reactors.

The commission has not yet decided when to approve the restart of the second reactor and is still discussing the issue with local residents, its officials said.

The commission has been investigating all 23 reactors to see if they were supplied with parts with fake quality documents and whether there are any safety concerns.

South Korea, Asia's fourth-largest economy, depends heavily on oil and gas imports but its nuclear reactors supply a third of its power.

Of the 23 reactors, four with a combined 3,680 MW power supply capacity remain closed, according to industry data.

Public support for nuclear power remains strong in South Korea despite last year's Fukushima disaster in Japan last year, and Seoul plans to have added another 11 reactors by 2024.

The government has been campaigning nationwide to save energy and avoid power blackouts in the colder than usual winter.

(Reporting by Meeyoung Cho, Editing by Jonathan Thatcher)

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UPDATE 2-Iberdrola to sell French wind parks to cut debt

* Deal is part of debt-cutting drive

* Strategy aimed at keeping investment credit rating

* Polish, U.S. asset sales could follow - sources

By Sarah Morris

MADRID, Dec 31 (Reuters) - Spanish utility Iberdrola is selling its French wind park unit to a consortium including General Electric for about 400 million euros ($529 million) in its drive to cut debt and keep an investment grade credit rating.

The world's largest operator of wind farms said in October it would sell some of its operations, slash investment and cut its workforce over the next two years in order to reduce debt by 6 billion euros to 26 billion by 2014.

Iberdrola is one of several Spanish firms, including Telefonica and Repsol, battling to avoid the big credit downgrades that have hit the cash-strapped Spanish government and which make borrowing harder, and more costly.

In a statement to the stock exchange regulator on Monday, Iberdrola said Iberdrola Renovables France (IBRF), which directly or indirectly controls 32 wind parks, would be sold to a consortium. The unit's offshore assets will be transferred to a separate entity before the sale.

Once the deal is completed, General Electric will own 40 percent of the unit and MEAG, the asset manager of German insurer Munich Re, another 40 percent. EDF Energies Nouvelles, the renewable unit of France's EDF, will own the remaining 20 percent.

The total installed capacity of the French onshore wind farms is 321.4 megawatts.

Iberdrola said the deal involved an initial payment of 350 million euros and an additional payment of 50 million euros subject to conditions.

At 0956 GMT Iberdrola shares were down 1.3 percent at 4.08 euros.

Some analysts think Iberdrola could cut its dividend to preserve its coveted investment credit rating if the Spanish government fails to pay it back in full for years of selling power at regulated prices..

S&P left Iberdrola's rating at just one notch above junk in November, citing concerns the government could delay repaying power companies the deficit of up to 24 billion euros they have racked up from selling electricity at a loss.

The French deal comes after the utility announced on Friday the sale of 20 percent of its stake in the Medgaz pipeline, running between Algeria and Spain, for 146 million euros.

A source with knowledge of the matter told Reuters earlier this month Iberdrola was close to a deal to sell renewable energy assets in Poland for about 200 million euros .

It had also received offers for 10 wind parks in the United States, said another source with knowledge of the matter.

On Saturday Bolivia nationalised two electricity distribution companies owned by Iberdrola. The companies contribute less than 1 percent of profit to the utility.

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FEATURE-Storms on U.S. Plains stir memories of the "Dust Bowl"

By Kevin Murphy

LIBERAL, Kan. | Sun Dec 30, 2012 6:59am EST

LIBERAL, Kan. Dec 30 (Reuters) - Real estate agent Mark Faulkner recalls a day in early November when he was putting up a sign near Ulysses, Kansas, in 60-miles-per-hour winds that blew up blinding dust clouds.

"There were places you could not see, it was blowing so hard," Faulkner said.

Residents of the Great Plains over the last year or so have experienced storms reminiscent of the 1930s Dust Bowl. Experts say the new storms have been brought on by a combination of historic drought, a dwindling Ogallala Aquifer underground water supply, climate change and government farm programs.

Nearly 62 percent of the United States was gripped by drought, as of Dec. 25, and "exceptional" drought enveloped parts of Kansas, Colorado, Oklahoma, Texas, and New Mexico, according to the U.S. Drought Monitor.

There is no relief in sight for the Great Plains at least through the winter, according to Drought Monitor forecasts, which could portend more dust clouds.

A wave of dust storms during the 1930s crippled agriculture over a vast area of the Great Plains and led to an exodus of people, many to California, dramatized in John Steinbeck's novel "The Grapes of Wrath."

While few people believe it could get that bad again, the new storms have some experts worried that similar conditions - if not the catastrophic environmental disaster of the 1930s - are returning to parts of Texas, Oklahoma, New Mexico, Kansas and Colorado.

"I hope we don't talk ourselves into complacency with easy assumptions that a Dust Bowl could never happen again," said Craig Cox, agriculture director for the Environmental Working Group, a national conservation group that supports converting more tilled soil to grassland. "Instead, we should do what it takes to make sure it doesn't happen again."

Satellite images on Dec. 19 showed a dust storm stretching over an area of 150 miles (240 km) from extreme southwestern Oklahoma across the Panhandle of Texas around Lubbock to extreme eastern New Mexico, said Jody James, National Weather Service meteorologist in Lubbock. Visibility was reduced to half a mile in places, stoked by high winds, he said. At least one person was killed and more than a dozen injured in car crashes.

"I definitely think these dust storms will become more common until we get more measurable precipitation," James said.

'DIRTY 30S'

The Great Plains is a flat, semi-arid, area with few trees, where vast herds of buffalo once thrived on native grasses. Settlers plowed up most of the grassland in the late 19th and early 20th centuries to create the wheat-growing breadbasket of the United States, encouraged by high commodity prices and free "homestead" land from the government.

The era known as the "Dirty 30s" - chronicled by Ken Burns in a Public Broadcasting Service documentary that aired in November - was when a 1930s drought gripped the Great Plains and winds carried away exposed soil in massive dust clouds.

Bill Fitzgerald, 87, a farmer near Sublette, Kansas, remembers "Black Sunday" on April 14, 1935, when a clear, sunny day in southwest Kansas turned black as night by mid afternoon because of a massive cloud of dust that swept from Nebraska to the Texas panhandle.

"My older brother and I were in my dad's 1927 or '28 Chevy truck a mile north and a mile west of the house and we saw it rolling in," Fitzgerald said. "It was about 10 p.m. when it cleared enough for us to go home."

Farming practices have vastly improved since the 1930s. Farmers now leave plant remnants on the top of the soil and less soil is exposed, to preserve moisture and prevent erosion.

Irrigation beginning in the 1940s from the Ogallala aquifer, a huge network of water under the Great Plains, also made land less vulnerable to dust storms.

DRYING UP

But the Ogallala aquifer is drying up after years of drawing out more water than was replenished.

Many farmers have had to drill deeper wells to find water. Others are giving up on irrigation altogether, which means they can no longer grow crops of high-yielding and lucrative corn. They will instead grow wheat, cotton or grain sorghum on dry land, which depends completely on natural precipitation in an area that typically gets 20 inches of rain a year or less.

Near Sublette, Kansas, farmer Gail Wright said he would probably give up irrigating two square miles of his land and would plant wheat and grain sorghum instead of corn because of the diminishing aquifer. Drilling deeper wells would cost $120,000 each, Wright said.

"When we drilled those wells in the 1960s and 70s, we were doing 1,500 or 1,600 gallons per minute," said Wright. "Now, they are down to anywhere from 400 to 600 gallons per minute. We probably pumped out 200 feet of water."

Another farmer in Sublette, 79-year-old Lawrence Withers, whose family farms land his grandfather settled in 1887, is resigned to a future without irrigation.

"We have pumped 170 feet off the aquifer, that's gone. There's just a little tick of water at the bottom," he said.

The Ogallala supplies water to 176,000 square miles (456,000 square km) of land in parts of eight states from the Texas panhandle to southern South Dakota. That amounts to about 27 percent of all irrigated land in the nation, according to the U.S. Geological Survey.

The volume of water in the aquifer stood at about 2.9 billion acre feet in 2009, a decline of about 9 percent since 1950, according to the Geological Survey. About two-and-a-half times as much water was drawn out in the 14 years ended 2009 as during the prior 15-year period, data shows.

The water may run out in 25 years or less in parts of Texas, Oklahoma and southwest Kansas, although in other areas it has 50 to 200 years left, according to the Geological Survey.

Rationing has been imposed on irrigation in the region but it may be too little too late.

"It's a situation where across the Plains the demand far exceeds the annual recharge," said Mark Rude, executive director of the Southwest Kansas Groundwater Management District.

RECORD DROUGHT

The worst drought in decades has exacerbated the situation. The semi-arid area around Lubbock, which typically gets about 19 inches of rain a year, received less than 6 inches in 2011, the lowest ever recorded. This year was better but still far below normal at 12.5 inches, meteorologist James said.

Climate change is also having an impact on the region, said atmospheric scientist Katharine Hayhoe, co-director of the Climate Science Center at Texas Tech University in Lubbock.

"It is definitely hotter in the summer and drier in the summer because of climate change," she said.

The average annual temperature in Lubbock has increased by one full degree over the last decade, according to National Weather Service data, and the average amount of rainfall has fallen during summer months by about .50 inch over the decade.

Some say government policies are making things worse.

Federal government subsidized crop insurance pays farmers whether they produce a crop or not, encouraging farmers to plant even in a drought year.

Another subsidized U.S. government program that pays farmers to take sensitive marginal land out of crop production and put it into grassland is gradually shrinking.

In a possible case of history repeating itself, high commodity prices are encouraging farmers to break up the land and plant crops when the 10-year conservation contracts with the government expire, said environmentalist Cox. This is similar to what happened in the 1920s when vast areas of grassland were plowed up.

The government also has imposed restrictions on how much land can go into conservation reserves to save money at a time of massive U.S. budget deficits, he said.

The amount of land in conservation reserves has declined by more than 2.3 million acres over the last five years in five states of the Great Plains - Texas, Oklahoma, Kansas, Colorado and New Mexico, according to U.S. Agriculture Department data.

If most of that land is plowed up for crops it could lead to more dust storms in the future.

"I think you are probably going to see increased erosion if that happens," said Richard Zartman, Chairman of the Plant and Soil Science Department at Texas Tech, adding that it was unlikely to get as bad as the Dust Bowl days.

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UPDATE 1-Hunger strike pressures Canada PM, aboriginal protests spread

* Hunger strike in 3rd week as "Idle No More" movement grows

* Aboriginal leaders demand top-level meeting

* Protests spread with help of social media

* Flash mobs in dozens of Canadian, U.S. shopping malls

By Louise Egan

OTTAWA, Dec 28 (Reuters) - A Canadian aboriginal chief in the third week of a hunger strike is urging Prime Minister Stephen Harper to "open his heart" and meet with native leaders angered by his policies as small impromptu protests spread beyond Canada's borders.

Chief Theresa Spence from the remote northern Ontario community of Attawapiskat has been fasting since Dec. 11 and has vowed to continue until Harper commits to talks on a litany of complaints, including new legislation that she says will harm native lands.

"He's a person with a heart but he needs to open his heart. I'm sure he has faith in the Creator himself and for him to delay this, it's very disrespectful, I feel, to not even meet with us," she said in an interview in Ottawa.

Spence is at the center of an unprecedented Canadian aboriginal protest movement called "Idle No More" that began with four women in the province of Saskatchewan raising awareness about the Conservative government's budget legislation passed earlier this month.

The legislation, which has also been criticized by opposition politicians, reduces environmental protections for lakes and rivers and makes it easier to sell reserve lands.

Aided by Facebook and Twitter, their protest proliferated and is now drawing comparisons to the "Occupy Wall Street" movement.

"Flash mob" protests with traditional dancing and drumming have erupted in dozens of shopping malls across North America. There have been rallies, marches and highway blockades by aboriginal groups across Canada and supporters have emerged from as far away as New Zealand and the Middle East.

The campaign aims to draw attention to dismal conditions faced by many of the country's 1.2 million natives, including poverty, unsafe drinking water, inadequate housing, addiction and high suicide rates.

'I'M WILLING TO DIE'

Camped out in a traditional teepee within sight of Ottawa's Parliament buildings, Spence appeared weak and short of breath but resolute on Thursday, Day 17 of her hunger strike, staying warm by a wood stove as a snow storm raged outside.

To critics who question her strategy and say her demands are too vague, Spence replies that she has run out of patience.

"I know it's hard for people to understand what I'm doing but it's for this pain that's been going on too long with our people," she said, sitting on her makeshift bed and flanked by supporters.

Blankets hung from the inside walls of the teepee and a faint aroma of cedar rose from branches spread on the ground. Spence is consuming only water, fish broth and a medicinal tea.

"It has to stop and I'm willing to suffer until the meeting goes on. Even if I don't make it, people will continue my journey. Like I keep saying, I'm willing to die for the people of First Nations because the suffering is too much," Spence said.

Spence was in the headlines last year when a housing crisis in her community forced people to live in tents in temperatures of minus 40 Fahrenheit (minus 40 Celsius).

The Canadian government suggested taxpayer funds were being squandered and appointed an outside adviser to oversee the town's finances, a move seen as insensitive and later rejected by the courts.

At the core of Spence's protest are what aboriginal groups say are unfulfilled promises by the federal and provincial governments dating back to treaties in the early 1900s that would give aboriginal groups a stake in natural resources development, among other benefits.

Many native communities are affected by mining developments or projects like Enbridge Inc's planned C$6 billion ($5.9 billion) Northern Gateway Pipeline. The project, which has yet to win government approvals, would take oil sands crude to the Pacific coast.

Harper met with native leaders in January but Spence says he imposed his own agenda. Harper's office declined to comment.

A spokesman for Aboriginal Affairs Minister John Duncan said the minister has tried repeatedly to reach Chief Spence.

"We will continue trying to engage the chief and other First Nation leaders to discuss how we can build on the progress we have made since 2006," said the spokesman, Jason MacDonald.

MacDonald said Ottawa had built and renovated schools and homes, invested in safe drinking water, introduced legislation to protect the rights of women on reserves and settled over 80 land claims.

Health minister Leona Aglukkaq, the one aboriginal member of Harper's cabinet, urged Spence on Friday to resume eating and to meet with Duncan.

SIMILAR TO 'OCCUPY' MOVEMENT?

Meanwhile, with the help of social media the Idle No More movement has taken on a life of its own in much the same way the first "Occupy Wall Street" camp gave birth to a multitude of "occupy" protests with no specific demand or leadership.

But Peter Russell, an expert in aboriginal politics at the University of Toronto, says unlike the "99 percent" campaign, aboriginals at just 3 percent of the population historically have taken drastic action to be recognized. He sees no sign "Idle No More" will dissipate soon.

Events listed on the group's Web site for Friday include rallies in Los Angeles and London, where protesters plan to present Queen Elizabeth with a letter.

But organizers say they've lost track. Their initial Facebook page has 33,000 members and the Twitter hash tag was mentioned 40,000 times in a single day at its peak on Dec. 21.

"This has spread in ways that we wouldn't even have imagined," said Sheelah McLean, an instructor at the University of Saskatchewan who was one of the four women who originally coined the "Idle No More" slogan.

"I don't think the hash tag is the most important thing that has happened," she said.

"What this movement is supposed to do is build consciousness about the inequalities so that everyone is outraged about what is happening here in Canada. Every Canadian should be outraged."

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UPDATE 4-Snow buries parts of U.S. Northeast, flights canceled

* Winter storm and coastal flood advisories issued

* Ski country gets a lift after little snowfall last year

By Neale Gulley

BUFFALO, N.Y., Dec 27 (Reuters) - A powerful winter storm pushed through the U.S. Northeast on Thursday, forcing the cancellation of hundreds of airline flights while bringing some holiday cheer to families hoping for snow and lifting spirits at ski resorts in the region.

The storm dumped a foot (30 cm) of snow on parts of the United States with the heaviest snow falling across northern New York and New England, the National Weather Service reported.

"It feels lovely to have wonderful snow for the kids to play in, and I think it's the kind of snow that's good for making forts and snowmen," said Katryna Nields, a musician in Conway, Massachusetts, who was outside her home shoveling snow.

"It's just the kind of snow you want for between Christmas and New Year's," she added.

The National Weather Service issued winter storm warnings for parts of Pennsylvania, New Jersey, New York and New England and coastal flood advisories from New York's Long Island to southern Maine.

Airlines canceled more than 800 flights on Thursday, according to FlightAware.com, a website that tracks flights.

Some flights into and out of the three major New York City area airports - Newark Liberty International, John F. Kennedy International and LaGuardia - were delayed due to the weather, the Federal Aviation Administration reported.

The weather service forecast 12 to 18 inches (30 to 46 cm) of snow for northern New England, accompanied by freezing rain and sleet, creating hazards on the highways and at airports.

More snow is headed east, said Alex Sosnowski, senior meteorologist at Accuweather.com.

"A new storm is in the works for portions of New England, the mid-Atlantic and the Ohio Valley," he said.

The new storm "will bring more snow to areas that received snow from the post-Christmas storm and will bring snow to some areas that got rain or mostly rain," he said, adding that it has the potential to strengthen to a strong nor'easter or blizzard in parts of New England.

Tom Olney, a 50-year-old stay-at-home father of two, was making plans to go sledding with his children in their hometown of Wayland, Massachusetts.

"We love snow," Olney said. "What else are you going to do when it's this wet and cold out?"

Western Massachusetts, like much of the Northeast, had an uncharacteristically mild winter last year, but residents such as Olney say they are ready for a more typical cold season.

"Mother Nature doesn't usually give you two in a row," he said. "We've still got a lot of supplies from last year, so I guess we're ready for it now."

Heavy snow was falling in Maine, Vermont and New Hampshire.

Eleven inches of snow was forecast for Buffalo, where some 8 to 12 inches (20 to 30 cm) of snow fell overnight into Thursday. Prior to that, Buffalo was 23 inches (58 cm) below average for this time of year, the weather service said.

"It's just a reminder, winter is here," said Tom Paone of the National Weather Service in Buffalo.

Daniel Ivancic, of the Buffalo suburb of Tonawanda, said he bought a snowmobile last winter that has sat largely idle with snow totals well below average.

"I waited and waited and, no snow. This winter it seemed like the same thing was going to happen until the storm hit," Ivancic said. "I'm just going to take advantage of every minute of it."

Police patrolling the New York State Thruway from Buffalo to Albany reported dozens of accidents, mostly involving cars that slipped off snowy roads overnight.

Freezing rain - making for treacherous travel conditions - was predicted for parts of Maryland, Pennsylvania, Virginia and West Virginia while significant rain was likely along the New Jersey, Virginia and Maryland coasts, the weather service said.

The storm system dumped record snow in north Texas and Arkansas before sweeping through the South on Christmas Day and then veering north.

The system triggered tornadoes and left almost 200,000 people in Arkansas and Alabama without power on Wednesday.

Authorities said an 81-year-old man died in Georgiana, Alabama after a tree fell on his home.

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UPDATE 3-Bolivia nationalises Iberdrola electricity companies

(Adds Spanish government comment)

By Carlos Quiroga and Sonya Dowsett

LA PAZ/MADRID Dec 29 (Reuters) - Bolivia nationalised two electricity distribution companies owned by Spanish utility Iberdrola on Saturday, the latest move by leftist President Evo Morales to assert control over the country's resources.

Iberdrola will be compensated according to a valuation to be drawn up by an independent arbiter, Morales said, adding that the measure was aimed at enhancing rural energy services.

"We considered this measure necessary to ensure equitable energy tariffs ... and to see to it that the quality of electricity service is uniform in rural as well as urban areas," Morales said.

President Morales has nationalised oil, telecommunications, mining and electrical generation companies.

In June, Morales took control of global commodities giant Glencore's tin and zinc mine in Bolivia and more nationalisations of mining companies could be ahead in the Andean country.

Iberdrola, whose office in capital city La Paz was being guarded by police on Saturday, has operated in Bolivia since the late 1990s. An Iberdrola spokesman said the company was studying the situation and declined to comment further.

Spain regretted Bolivia's actions, the Spanish Ministry of Foreign Affairs said in a statement on Saturday, adding the government hoped the shareholders of the companies involved would be fairly compensated.

"This decision by the Bolivian government involves companies that carried out the public service of distributing electricity that have never belonged to the Bolivian state," the statement said.

The Iberdrola units are Electropaz, which supplies around 470,000 customers in the cities of La Paz and El Alto; and Elfeo, which supplies over 80,000 customers in the city of Oruro.

The nationalisation also includes two small suppliers owned by Iberdrola, which provide services to the distributors.

In 2006, Morales announced the takeover of petroleum companies operating in Bolivia. He later nationalised oil and gas reserves to redistribute wealth to the landlocked country's indigenous majority.

Iberdrola is not the first Spanish company to have its assets seized in Latin America.

Bolivia decided to nationalise a power transmission unit of power grid operator Red Electrica in May, just weeks after Argentinian President Cristina Fernandez seized YPF , the country's biggest energy company, accusing oil major Repsol of underinvesting at the unit.

Repsol called the move unlawful, discriminatory and a violation of a bilateral investment treaty between Spain and Argentina. The World Bank's arbitration body has agreed to begin an arbitration process on the Repsol case.

Other Spanish companies in Bolivia include bank BBVA and motorway operator Abertis, though exposure for each is less than 1 percent of revenues. (Additional reporting by Blanca Rodriguez in Madrid and Hugh Bronstein in Buenos Aires; editing by Gunna Dickson)

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UPDATE 1-Portugal to beat asset sale goal with Vinci's ANA buy

(Adds more details, background)

By Sophie Sassard and Sergio Goncalves

LONDON/LISBON Dec 27 (Reuters) - Portugal is set to beat its privatisation revenue goal by selling airport operator ANA to French construction firm Vinci in a deal worth about 3 billion euros ($3.97 billion), sources said.

Vinci was chosen because of the high value of its bid for ANA compared with the other three final contenders, Fraport of Germany, Zurich airport operator Flughafen and Argentinian infrastructure group Corporacion America, people with knowledge of the matter told Reuters on Thursday.

Lisbon is under pressure to get the most it can from state-owned asset sales after it agreed to raise 5.5 billion euros by the end of 2013 as part of a 78 billion euro bailout agreement with the troika of EU/IMF lenders, which also included across-the-board tax hikes and spending cuts.

"The Vinci offer is so high that it was placed at the top of the list for the cabinet to evaluate. The preliminary evaluation was to recommend Vinci, for its financial bid and overall parameters. But the decision is with the cabinet," one of the people said.

Portuguese government officials said the cabinet was still in a meeting and had no immediate comment.

Lisbon has been betting on infrastructure deals to cut its debt as demand for regulated assets in Europe remains strong despite the region's debt crisis.

It has so far sold stakes in power companies EDP and REN, mainly to Chinese investors.

Vinci has made no secret of its eagerness to build its fledgling airport concessions business. It is trying to rebound from the loss earlier this year of a bidding contest for Turkish airports operator TAV as well as a decision by Germany's Hochtief to suspend a planned sale of its airports.

ANA posted record profit last year of 76.5 million euros and revenue of 425 million, despite the country's economic crisis, as the number of foreign visitors rose.

More than three fifths of revenue comes from domestic and intra-European flights and Portugal hopes the potential for growth in long-haul flights to South America and Africa, which could generate high fees for ANA, will appeal to investors.

Potential buyers also see the prospect of increasing profits by running ANA more efficiently and developing non-aviation revenue such as from duty free sales and parking fees, people close to the transaction said.

Vinci declined to comment. ($1 = 0.7563 euros) (Reporting by Sophie Sassard in London and Sergio Goncalves in Lisbon; Additional reporting by James Regan in Paris; Editing by Erica Billingham and Helen Massy-Beresford)

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UPDATE 3-Portugal beats asset sale goal as Vinci buys airport operator

* Vinci only sole bidder, beats 3 international consortia

* ANA also to help Portugal with 2012 deficit target

* Portugal still plans more privatisations in 2013 (Adds Vinci's revenue estimates in paragraph 6, details)

By Sergio Goncalves and Filipa Cunha-Lima

LISBON, Dec 27 (Reuters) - French group Vinci won a privatisation tender for Portugal's airports operator ANA on Thursday with a hefty 3.08 billion euro ($4.1 billion) bid, enabling debt-laden Lisbon to beat its EU/IMF asset sale goal.

"This shows our capacity to attract foreign investment and raise significant sums above market expectations despite difficult circumstances," Treasury Secretary Maria Luis Albuquerque told a briefing. "Luckily, the highest bidder also offered us the best strategic project."

Vinci, the largest construction company in Europe by revenue, snapped up a 95 percent stake in ANA outbidding three international consortia. They were led by Germany's Fraport, Switzerland's Flughafen Zurich and Argentina's Corporacion America, and involved funds and companies from Australia, Brazil, Britain, Mexico and Portugal.

Despite Portugal's steep recession and debt crisis, ANA has been churning out profits out of its network of airports in Portugal, including those serving the largest cities of Lisbon and Porto, as well as the Algarve and Alentejo regions and the Madeira and Azores archipelagos.

Vinci operates 9 regional airports in France and is the concession company for Cambodia's three international airports.

It said in a statement that with the acquisition, its airports division will have revenues of more than 600 million euros serving some 40 million passengers, up sharply from last year's 150 million euros with 8.5 million passengers.

In Portugal, Vinci is already one of two main shareholders in Lusoponte that operates Lisbon's two bridges over the Tagus, including the Vasco da Gama - the longest bridge in Europe.

Lisbon needs to get the most it can from state-owned asset sales after it agreed to raise 5.5 billion euros by the end of 2013 as part of a 78 billion euro bailout agreement with the troika of EU/IMF lenders, which also included across-the-board tax hikes and spending cuts.

The government has been betting on infrastructure deals to cut its debt as demand for regulated assets in Europe remains strong despite the region's debt crisis.

MORE TO COME

It had earlier raised about 3.4 billion euros by selling major stakes in power firms EDP and REN mainly to Chinese investors, so now it beat the target by nearly 1 billion euros. That is despite having shelved the sell-off of flag carrier TAP earlier this month after the sole bidder failed to present the necessary financial guarantees.

"It's a world record for such transactions involving airports," Albuquerque said of the ANA deal.

Portugal's progress in its economic adjustment, especially in privatisations, has won praise from Brussels and Berlin and contrasts sharply with Greece's performance after Athens slashed its privatisation revenue target in late October

Next year, Portugal is to privatise the profitable national postal service CTT, the cargo unit of the national railway company Comboios de Portugal, parts of water utility Aguas de Portugal, the insurance arm of state-controlled bank Caixa Geral de Depositos and state broadcaster RTP.

Although privatisation revenues only count to reduce state debt but not the budget deficit, the government has a concession agreement with ANA that it argues qualifies some 800 million euros for deficit reduction purposes this year.

The additional anti-deficit revenue, which is yet to be approved by Eurostat, is needed after tax collection fell short due to the worst recession since the 1970s. Portugal has to meet a budget gap target of 5 percent of GDP this year and 4.5 percent in 2013.

Vinci is eager to build its fledgling airport concessions business, especially after losing a bidding contest for Turkish airports operator TAV earlier this year and an upsetting decision by Germany's Hochtief to suspend a planned sale of its airports.

More than three fifths of ANA's revenue comes from domestic and European flights and investors see a potential for growth in long-haul flights to South America and Africa. Profits could also be boosted by running ANA more efficiently and developing non-aviation revenue such as from duty free sales and parking. ($1 = 0.7563 euros) (Additional reporting by Sophie Sassard in London, Andrei Khalip in Lisbon, writing by Andrei Khalip; editing by Ron Askew)

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UPDATE 3-More than 230,000 without power in US East after storms

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EnBW to cut 1,350 jobs and speed up cost cuts

FRANKFURT | Fri Dec 21, 2012 7:21am EST

FRANKFURT Dec 21 (Reuters) - EnBW, Germany's No.3 utility, will cut nearly 7 percent of its workforce in a response to weak energy demand and its home country's decision to exit nuclear power.

The group said on Friday it would cut 1,350 jobs, or 6.8 percent of staff, and added it would speed up its "Fokus" savings programme, now aiming to complete measures to improve operating earnings by an annual 750 million euros ($993 million) by the end of next year, instead of 2014.

"EnBW's acceleration of its efficiency programme is the logical response to the persistently difficult general and market conditions in the energy industry," the group said.

EnBW has been dealt a massive blow, along with its larger rivals E.ON and RWE, by Germany's decision last year to end all nuclear power generation by 2022 and immediately shut 40 percent, including two of the company's reactors.

Weak demand for electricity because of Europe's economic crisis has also reduced revenue and utilisation of capacity at its power plants and has curbed the company's trading activities.

Both E.ON and RWE have announced job cuts, jointly slashing more than 21,000 jobs in an attempt to cope with the structural changes in their industry.

At 1201 GMT, EnBW's thinly-traded shares were down 1.6 percent, while RWE's shares fell 0.7 percent. Shares in E.ON, Germany's largest utility, were down 0.4 percent, while the Stoxx Europe 600 utilities index was flat.

EnBW is 46.75 percent-owned by the German state of Baden-Wuerttemberg, with another 46.75 percent owned by nine of the state's municipalities. The market free-float is just 0.37 percent, which means few analysts track it. ($1 = 0.7555 euros) (Reporting by Christoph Steitz; Editing by Elaine Hardcastle)

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UPDATE 2-Russian and European leaders trade barbs on energy

* EU concerned by Russian actions on civil, human rights

* Other disputes include trade, visas

* European Commission announces funding for Ukraine

By Alexei Anishchuk and Barbara Lewis

BRUSSELS, Dec 21 (Reuters) - Russia's president and European Union leaders failed to narrow wide differences on Syria, immigration and a string of other issues at a summit on Friday marked by testy exchanges over their biggest bone of contention, energy policy.

At the close of hours of talks, European Commission President Jose Manuel Barroso gave President Vladimir Putin a public lecture defending the bloc's energy regulation, and the Russian leader responded by telling him he was "emotional" and "wrong".

Analysts had warned there was little chance the meeting - held on Putin's first visit to Brussels since his re-election in May - would make progress on the core issue of energy, which has long poisoned relations between the 27-nation bloc and Russia.

Russia is infuriated by EU efforts to liberalise its energy market and force dominant suppliers such as state-dominated Gazprom to sell off infrastructure to prevent them also controlling the distribution network.

Early on Friday, during the 30th in a long series of twice-yearly meetings, Putin referred to EU energy law as "uncivilised".

"Of course the EU has the right to take any decisions, but as I have mentioned ... we are stunned by the fact that this decision is given retroactive force," Putin said, referring to the fact the regulations apply to existing pipelines.

At the closing press conference, Barroso said the European Union was "respecting all international agreements and also the principles and rule of law".

Barroso declared the press conference finished but Putin called back the audience to make sure he had the last word.

Referring to Barroso as "my good old friend", Putin said "he is so emotional because he knows he is wrong".

MUTUAL DEPENDENCE

Europe relies on Russia, which sits on the world's biggest gas reserves, for around a quarter of its natural gas needs.

Over the last decade, a series of disputes between Moscow and its ex-Soviet neighbours - Ukraine and Belarus - have disrupted its gas exports. The disruption increased the EU's resolve to diversify supply away from Russia.

For its part, Russia has been busy building pipelines to bypass Ukraine as a transit nation, while pushing Kiev to cede control of its gas pipeline network.

On Thursday, Putin criticised Ukraine for failing to strike a compromise deal over gas supplies.

In a show of support for Ukraine, the European Commission chose the day of the EU-Russia summit to announce it was giving an extra 68 million euros ($90 million) to Ukraine, including 45 million to reform its energy market.

While energy is the most sensitive issue for Russia, a long list of other grievances includes simmering trade disputes, European Union criticism of its attitude towards civil liberties and travel visas.

Russia is also at odds with Western powers over the conflict in Syria, which has killed more than 40,000 people since an uprising against President Bashar al-Assad began in March 2011.

Putin said that to reach a "durable arrangement" in Syria, agreement was needed first on how to protect the interests of all religious and ethnic groups. "Everyone is interested in stopping the bloodshed and violence," he said.

On the subject of travel visas, Putin complained Russia was being unfairly treated compared with other nations.

"I have a long list of states here with me which have a visa-free regime with the EU. There is Venezuela, Honduras, Mauritius, Mexico, seems everyone else is there," Putin said.

Putin was greeted on arrival at the summit by four topless women, protesting against civil rights curbs in Russia and shouting "Putin, go to hell". They were bundled away by police.

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Croatia plans $4.8 bln in power investments by 2017

* HEP plans to add 2,800 MW capacity to current 4,000 MW

* Financing from own funds, borrowing, strategic partners

* Plans to cut more than 20 pct of workforce

By Igor Ilic

ZAGREB, Dec 21 (Reuters) - Croatian state power board HEP plans to invest more than 27 billion kuna ($4.76 billion) in electricity generation to become self-sufficient in power by 2017, Chief Executive Zlatko Koracevic said on Friday.

Croatia, scheduled to join the European Union next July, now imports more than 30 percent of its power. Since gaining independence in 1991, it has largely neglected investments in new generation plants.

"Now we must catch up, and in the next four years we plan to invest 2.1 billion kuna ($370 million) in upgrading the current facilities and 25.3 billion kuna in building new facilities. This will increase our production capacity by some 2,800 megawatts (MW)," Koracevic told a news conference.

HEP currently operates some 4,000 MW of installed capacity, mostly in hydro-power and thermal plants. It is also a co-owner of a nuclear power plant located in neighbouring EU member Slovenia.

"Our goal is to invest some 12 billion kuna from our own resources, borrow some 9 billion kuna and find strategic partners for the rest," Koracevic said.

The biggest and most advanced projects at the moment include a 500 megawatt coal-fired thermal plant on the northern Adriatic peninsula of Istria and a 68 MW hydro-power plant in the hinterland of the southern Adriatic resort of Dubrovnik.

Meanwhile as part of a drive to improve profitability and efficiency, HEP also plans to reduce its workforce by about 3,000 people in the next four years, the CEO said. It currently employs some 13,000 people.

Last month HEP issued a $500 million bond on foreign markets to finance its debt and investment projects.

In the first six months of this year HEP posted a net loss of 315.5 million kuna, but Koracevic said the company would have a net profit for the full year. He did not provide an exact forecast. ($1 = 5.6748 Croatian kunas) (editing by Zoran Radosavljevic and Jane Baird)

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Turkey aims to extend Algerian LNG contract past 2014

ANKARA | Fri Dec 21, 2012 7:51am EST

Yildiz also told reporters that Turkey may seek to raise the amount of LNG it buys from Algeria to 6 bcm and seek a five- to 10-year contract. The two sides have agreed to next year's 2.5 bcm of spot purchases, he said.

Turkey has also sought to buy 6 bcm of LNG from the United States but those purchases will not be carried out for three or four years, Yildiz said. (Reporting by Orhan Coskun, writing by Ayla Jean Yackley; Editing by Anthony Barker)

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UPDATE 3-Eni, Anadarko tie-up boosts Mozambique gas prospects

* Deal affects two adjacent fields in the Rovuma Basin

* Cos say ops in the two fields will eventually be combined

* Will jointly construct onshore gas liquefaction facilities

* Some 150 tcf of gas already found off Mozambique coast

* Exxon, Shell, others have yet to gain a foothold there

By Francesca Landini

MILAN, Dec 21 (Reuters) - Oil and gas companies Eni and Anadarko plan to unite their neighbouring gas fields off Mozambique's coast, boosting the development prospects of one of the world's most significant new energy projects.

The two companies said on Friday that while their offshore activities would remain separate at first, they would be conducted in a co-ordinated way and the two adjacent fields they operate in the Rovuma Basin would eventually be combined.

Meanwhile, the partners will jointly plan and construct common onshore gas liquefaction facilities in the Cabo Delgado province of northern Mozambique.

Four of the five largest oil and gas discoveries in the world this year have been made off Mozambique. Potentially the biggest and most profitable of them all sits across the border between the blocks operated by state-backed Italian group Eni and U.S. independent Anadarko.

Some 150 trillion cubic feet (tcf) of gas have been found off the east African country's shores so far, enough to supply Germany, Britain, France and Italy for 15 years, and the government and companies scouting wells have estimated there may be potential to double that estimate.

Even the first stage of proposed Liquefied Natural Gas (LNG) facilities that allow the gas to be transported by special ship to energy-hungry Asian markets could satisfy 10 percent of demand in Japan, one of the region's biggest LNG markets.

COMMON RESOURCES

"We expect the HOA (heads of agreement) to lead to a unitisation agreement to further facilitate the efficient development of the common resources," said Anadarko President and CEO Al Walker.

He said the two groups would work alongside the Mozambican government toward a shared target of exporting first LNG cargoes in 2018.

A source familiar with the deal said it increased the likelihood that the 2018 deadline would be met.

"It's an important step because it shows they've got round a table fast to agree to work together (on unitisation)," the source said. "The importance is that without an agreement project times could have been thrown back."

Takeover talk has swirled around Anadarko through the past year, in large part because of its Mozambique position, with one banker describing the company as "the oil industry hottest M&A prospect in years".

A source close to Royal Dutch Shell has said the Netherlands-based world No. 2 has held talks about buying into Anadarko's block and is also interested in Eni's. Traders have also speculated Shell might bid for Anadarko.

Shell tried and failed earlier this year to buy a company that holds a stake in the Anadarko block. Thai group PTT eventually won the contest for Cove Energy with a $1.9 billion bid after Shell backed away from a bidding contest.

Other big players including BP, ExxonMobil and Chevron are also seen as likely to seek an interest in the fields. Shell and Chevron in particular are betting heavily on LNG as a future source of income, and do not want to find the costly Australian projects into which they are sinking tens of billions of dollars priced out of the market.

Friday's deal also represents a boost for Mozambique, which aims to use the gas finds as a starting point to develop domestic industries as the LNG exports lift government revenue by between $6 billion and $8 billion a year.

Anadarko is the operator of Mozambique's offshore Area 1 with a 36.5 percent interest. Japanese group Mitsui & Co owns 20 percent, India's Bharat Petroleum Corp 10 percent, Videocon Industries Ltd 10 percent, PTT 8.5 percent and Mozambique's state-owned ENH 15 percent.

Eni operates Area 4 with a 70 percent interest. Portugal's Galp Energia, South Korea's KOGAS and ENH hold 10 percent each.

Anadarko's stock climbed 2.5 percent on Thursday, making it the biggest gainer among top international oil stocks, although it is a consistently volatile stock and in out-of-hours trading on Friday it had given up much of that gain.

Eni shares were little changed.

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US releases initial report on fracking impacts on drinking water

WASHINGTON | Fri Dec 21, 2012 11:22am EST

The Environmental Protection Agency said the report, requested by Congress in 2010, would be finalized for public comment and peer review in 2014.

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UPDATE 2-US issues framework on study on fracking and water

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UPDATE 1-U.S. EPA sets new emission limits on industrial boilers

(ADDS ADDITIONAL REACTIONS AND COST ESTIMATE FROM THE NAM)

WASHINGTON Dec 21 (Reuters) - The U.S. Environmental Protection Agency has finalized rules to curb pollution from industrial boilers and large incinerators, revising earlier versions to target only the largest polluters and give them more time to comply.

The agency on Friday formalized standards it initially released in March 2011 for reducing toxic air pollution, including mercury and particle pollution, known as soot, from boilers and solid waste incinerators.

Boilers, which are typically fired by coal, oil, natural gas and biomass, are used to power heavy machinery and provide heat for industrial processes.

The new rules target roughly 2,300 boilers, or less than one percent of the 1.5 million units now operating in the United States, requiring them to meet numerical limits on their release of air toxins.

These large-source boilers, found mainly at refineries, chemical plants, and other industrial facilities, will have three years to comply and can be granted a fourth year if needed to install controls, according to the EPA.

The rule also targets 106 industrial solid waste incinerators, which have five years to comply with the EPA standards.

"The adjusted standards require only the largest and highest-emitting units to add pollution controls or take steps to reduce air pollution, making the standards affordable, protective and practical," according to an EPA factsheet.

Some environmental groups said the EPA's handling of the long-delayed boiler rules signals that the agency's upcoming regulation will be more flexible to industry concerns.

"These watered-down rules suggest the Obama administration will collaborate more with industry in the second term," said Frank O'Donnell of Clean Air Watch.

The EPA first introduced the rule in 2005, but the U.S. Circuit Court of Appeals for the D.C. Circuit vacated it in 2007.

The rule was re-proposed in June 2010 but industry groups slammed that version, calling its set limits unachievable, prompting the EPA to relax and reintroduce the rule.

"After years of delays, the finalized Boiler MACT standard ends uncertainty and allows businesses to move forward with one standard that applies across the nation, leveling the playing field," said Howard Learner, executive director of the Environmental Law & Policy Center.

"MACT" is an acronym for Maximum Achievable Control Technology.

Despite relaxing the rules, the EPA said the standards will prevent up to 8,100 premature deaths, 5,100 heart attacks, and 52,000 asthma attacks. The agency estimated that Americans will receive $13 to $29 in health benefits for every dollar spent to meet the final standards and create a small net increase in jobs.

Some industry groups were still wary.

"Several billions of dollars in capital spending will be necessary to comply. This is a significant investment for an industry still recovering from the economic downturn, especially in light of the growing cumulative regulatory burden we face," the American Forest & Paper Association, the national lobby group of the forest products industry, said on Friday.

The National Association of Manufacturers (NAM), an opponent of EPA regulations, said in November that compliance costs for the agency's six air pollution rules, including the boiler rule, could total $111.2 billion by EPA estimates and up to $138.2 billion by industry estimates.

The lobby group said the boiler rule would cost covered sources $2.7 billion in annualized costs in 2013 and $14.3 billion in upfront capital spending - higher than EPA estimates of $1.9 billion in annualized costs in 2013 and $5.1 billion in capital spending.

Other groups that have opposed the rules include the Industrial Energy Consumers of America - representing the chemicals, cement, aluminum and other industries.

Bob Bessette, the President of the Council of Industrial Boiler Owners (CIBO), cautiously welcomed the revised rule but said it is still studying its economic impact.

"Hopefully, the changes EPA has made will decrease the economic and jobs impact on the still-struggling manufacturing, commercial, and institutional sectors and national economy," he said. (Reporting By Valerie Volcovici; Editing by Nick Zieminski and David Gregorio)

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UPDATE 2-Enersis shareholders OK Chile's biggest cap hike ever

* Cap hike destined to fund acquisitions, raise stakes in firms

* Capital increase set at nearly $6 billion

* Enersis positioned as leading regional energy group

* Approval comes after months-long battle, hike first set at $8 bln

By Anthony Esposito and Felipe Iturrieta

SANTIAGO, Dec 20 (Reuters) - Shareholders of Chile's Enersis on Thursday approved a controversial planned capital increase of nearly $6 billion, the biggest in the country's history, that will position Enersis as the region's leading energy group.

The approval comes after a months-long tussle between Chile's powerful pension funds and Enersis over the amount of the capital hike, intended to fund acquisition opportunities and raise stakes in firms in which it already has a participation.

The increase was originally set at $8.02 billion, but minority shareholders argued that assets Enersis' parent company, Spanish energy company Endesa, planned to use to subscribe to its portion of the share issue were overpriced.

Shareholders on Thursday approved the proposal to release around 16.441 billion shares of Enersis at 173 pesos each. Enersis shares closed at 173.75 pesos on Thursday.

"AFP Capital (pension fund) decided to approve Enersis' proposed capital increase under the conditions presented today during the shareholders' meeting," AFP said in a statement. "The capital increase can be analyzed as being beneficial for both parts," it added.

Of the total, Endesa will subscribe to almost 10 billion shares in exchange for a number of its Latin American assets, which it had valued at around $3.6 billion.

Endesa has said it hoped Enersis will complete the capital increase during the first half of 2013.

"We've re-ordered the situation," Endesa Chairman Borja Prado told reporters at the end of the meeting. "We've defined an investment vehicle for Latin America and we want to make it grow."

Enersis will use part of the increase to make acquisitions in Brazil, Colombia and Peru, Endesa said earlier this month. The company has energy generation, transmission and distribution operations in Argentina, Brazil, Colombia, Chile and Peru.

TURBULENT APPROVAL PROCESS

Private pension funds had also expressed skepticism about Enersis' plans to use the proceeds, suggesting the operation might be aimed at helping Endesa's parent company, Italy's Enel , Europe's most indebted utility.

Opposition from minority shareholders, especially the pension funds, had prompted Chile's regulator to step in and impose conditions on the deal.

Thanks to the operation, Enersis will have the biggest market capitalization of Santiago's blue-chip IPSA stock index.

Shares in Enersis closed 0.36 percent weaker on Thursday, underperforming the IPSA, which ended broadly flat.

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UPDATE 2-Deutsche Telekom finance head to become CEO at end 2013

* Obermann to leave at end-2013, be succeeded by Hoettges

* Hoettges says not planning big change in strategy

* Obermann says leaving of his own volition

* Shares up 0.5 percent

By Maria Sheahan and Christoph Steitz

FRANKFURT, Dec 20 (Reuters) - Deutsche Telekom chief executive Rene Obermann has unexpectedly announced he will step down at the end of 2013 and be succeeded by finance director Timotheus Hoettges.

Hoettges, 50, said on Thursday he was not planning major changes to strategy and would continue Obermann's drive of investing in the United States and Germany as the firm battles to return to revenue growth against a tough economic backdrop.

"I have worked with Obermann for 12 years, and I don't expect to change a lot in the way that we do things," he told journalists during a conference call.

He is, however, expected to bring a fresh spark to Germany's former state telecoms monopoly, as he is considered by analysts to have the energy to take on challenges and an ability to absorb knowledge. But he has a big job ahead of him.

The European telecoms industry is struggling with sluggish economic growth, costly investments and cut-throat competition, and on top of that Deutsche Telekom has had its hands full with trying to fix its troubled T-Mobile USA business.

The German government, Deutsche Telekom's biggest shareholder with a 32 percent stake, said it welcomed the choice of Hoettges as new CEO because it promised continuity.

"The chief strategist so far becoming the new captain indicates that the course will be held," a spokesperson for the finance ministry told Reuters.

Hoettges joined the group in 2000 after playing a central role in the merger of VIAG AG and VEBA AG to form E.ON , now Germany's biggest utility.

In 2009, he was promoted to finance chief at Deutsche Telekom and, among other things, oversaw the move to put its British mobile business in a joint venture with France Telecom,.

"Hoettges is extremely good as a CFO, he's well respected by investors, but it remains to be seen whether he has the vision and political clout to succeed as CEO," Espirito Santo analyst Will Draper said.

Hoettges said the company had not yet decided on a new finance director to replace him.

THE ENGINE ROOM

Obermann was the youngest-ever chief executive of a German blue-chip firm at the time when he took over in 2006, aged only 43. He gained a reputation for being eager to keep unions and politicians happy and wary of making big strategic decisions.

One of his boldest moves was a deal to sell T-Mobile USA, to AT&T, but it collapsed last year amid concerns from competition regulators, dealing a blow to Obermann's reputation.

T-Mobile USA was a growth engine for Deutsche Telekom in its early days but is a rundown asset now that has been haemorrhaging customers. Deutsche Telekom is now trying to merge the business with smaller rival MetroPCS.

Obermann said he was leaving to work for a smaller company where he was "closer to the engine room" than he could be at an international corporation, without providing details.

Analysts were split over whether to believe Obermann's assurances that he was leaving of his own volition.

"If the board or the main shareholders were unhappy about the CEO's performance, they probably would have appointed an outsider, not the CFO, who also has been responsible for what has happened at the company over the last few years," Exane BNP analyst Mathieu Robilliard said.

Espirito Santo's Draper meanwhile said: "Obermann has had a lot of opportunity to fix the U.S. and yet it still remains Deutsche Telekom's biggest problem."

Obermann also disappointed investors with a bigger than expected dividend cut announced earlier this month as the company's investment drive eats away cash.

European peers Telefonica, the Netherlands' KPN , Telekom Austria, and France Telecom had already cut their dividends earlier this year, hurt by a weak economy and fierce competition that has driven down prices.

Deutsche Telekom shares closed 0.5 percent higher at 8.63 euros, outperforming a 0.2 percent fall in the STOXX Europe 600 European telecoms index.

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Chile Enersis shareholders approve around $5.898 bln cap hike

SANTIAGO | Thu Dec 20, 2012 1:24pm EST

SANTIAGO Dec 20 (Reuters) - Shareholders of Chile's Enersis on Thursday approved a controversial planned capital increase of roughly 5.898 billion, the biggest in the country's history, that will position Enersis as the region's leading energy group.

The approval caps a months-long tussle between Chile's powerful pension funds and Enersis over the amount of the capital hike, intended to fund acquisition opportunities and raise stakes in firms in which it already has a participation.

The increase was originally set at $8.02 billion, but minority shareholders argued that assets Enersis' parent company, Spanish energy company Endesa, planned to use to subscribe to its portion of the share issue were overpriced.

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UPDATE 3-Storms knock out power for 400,000 in US Midwest/Gulf

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Britain's new dash for gas will require more storage investment

* Rising import dependency requires new gas storage sites

* Volatile renewable capacity creates need for flexible storage

* But current market conditions fail to provide investment case

* Industry calls for government incentives

By John McGarrity

LONDON, Dec 20 (Reuters) - Britain needs to provide more incentives to draw investment into additional gas storage capacity, analysts say, as the country builds new gas-fired power stations fuelled largely by imported supplies.

Britain has a relatively small gas storage capacity because it has so far been able to rely on its own North Sea reserves, but domestic supplies are dwindling fast and analysts point up the need for more storage to meet demand during times of potential import interruptions.

They also say that gas storage sites are needed to fill supply gaps caused by sudden falls in renewable power capacity, which makes up an increasing share of Britain's power mix.

"There are two major issues at stake here. Will we have enough available gas to supply power stations that come online when the wind isn't blowing? And can we rely on domestic supplies when there are outages to pipelines or disruptions to LNG (liquefied natural gas) shipments?" said David Odling, a consultant with Oil and Gas UK.

Persuading companies to spend billions of pounds on new storage infrastructure will require a mixture of market-based incentives and government intervention, according to consultancy Frontier Economics.

"Under a semi-regulated approach, developers are more likely to invest in the type of storage preferred by policy makers," Frontier said.

A storage facility could receive financial support in the form of a top up payment whenever summer-winter price spreads fall below a certain threshold, the company said in a report.

Scottish and Southern Energy, one of Britain's leading utilities, said government support is required to make potential investment into storage attractive.

"We are working closely with government to explore what this support may look like," it added.

Other leading utilities declined to comment on the issue.

A consultation on new gas storage will run until April next year.

FLEXIBLE STORAGE NEEDED

Britain was a net exporter of gas until 2004, but steady domestic production drops of 7 percent per year mean that the UK now has to import more than half of its annual needs, data from National Grid shows.

Despite the fall in domestic reserves, National Grid says that gas will play an important role in supplying future British energy needs, requiring additional gas storage capacities.

It says Britain's gas storage space has only increased by around 1 billion cubic metres (bcm) in the last 10 years, comparable to just 1.1 percent of annual demand, to a present level of around 4.6 bcm.

"No further investments have been triggered, but ... reinforcement will be required to support new storage projects," National Grid said.

Analysts further warn that the country's future energy mix will need more flexible storage capacity than current facilities.

A UK parliament report says that Britain will in future need smaller, so-called "quick-in, quick-out" storage facilities, which are designed to meet variable demand patterns at short notice, rather than large sites that serve a more strategic reserve purpose.

Britain's biggest storage site is currently Centrica's North Sea facility at Rough, off the coast of Scotland.

The facility can store around 3.6 billion cubic metres of gas, equivalent to 40 days of supply, accounting for around three quarters of Britain's total storage capacity, according to figures from National Grid.

Utilities typically use times of low demand and prices, such as summer, to buy gas and inject it into storage sites for sale in winter, when cold weather pushes up demand and prices.

But the economic slump of the past years and low gas demand due to coal being more profitable for use in power generation have resulted in small differences between winter and summer gas prices that makes large investment into new storage sites uneconomic.

DECC said that gas accounted for 28.2 percent of Britain's electricity generation in the third quarter of 2012, its lowest third quarter share for 14 years, while coal accounted for 35.4 percent, its highest third quarter share for 14 years.

The Department of Energy and Climate Change (DECC) said on Thursday that offshore wind production increased by 54 percent in the third quarter of 2012, compared with Q3 of the previous year, while onshore wind power generation up by 38 percent, further highlighting the need for additional flexible storage.

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UPDATE 1-Azeri gas group in talks to buy Nabucco pipeline stake

* Nabucco West pipeline competes against TAP project for Azeri gas

* Azeri group says stake in Nabucco West key for it to be picked

* Nabucco project had to downsize to stay in competition (Adds details, background)

By Tsvetelia Tsolova

SOFIA, Dec 20 (Reuters) - Azerbaijan's Shah Deniz II gas group could agree to take over a 50 percent stake in the Nabucco pipeline consortium by January, boosting Nabucco's prospects in a competition between projects that aim to pipe Azeri gas into Europe.

Nabucco stakeholder Bulgarian Energy Holding (BEH) said on Thursday that talks were advanced and that he hoped a deal could be sealed on Jan. 10 at a Nabucco shareholders meeting in Sofia.

"We are holding talks almost every day. We expect Shah Deniz to acquire 50 percent of the shares in the Nabucco consortium," Mikhail Andonov, head of BEH, told reporters.

The Shah Deniz II consortium has already signed a funding deal with Nabucco's rival, the Trans-Adriatic pipeline (TAP) pipeline, which aims to pumpt the gas to Italy.

Shah Deniz II has said that Nabucco would have to hand over a significant stake in the project in order to stay in the race.

"There are two semi-finals for the Azeri gas. Such a deal will boost significantly the prospects for Nabucco," BEH's Andonov said.

A Nabucco spokesman declined to comment.

DOWNSIZED NABUCCO

The Nabucco gas pipeline project was initially designed to transport an annual capacity of 32 billion cubic metres of Azeri and other central Asian gas through Turkey and southeastern Europe into Austria.

But its high costs and a lack of gas suppliers beyond the 16 bcm Shah Deniz II consortium led to the project being downsized and shortened.

The new Nabucco West project now aims to ship 16 bcm of gas from the Turkish border to Austria, leaving the transit through Turkey to the joint Azeri-Turkish TANAP pipeline.

The European Union supports the delivery of Azeri gas to the region, which is expected to start in 2018 regardless of the pipeline chosen, to reduce its dependency on Russian gas imports.

Andonov said the 50 percent stake under discussion with the artners in Shah-Deniz II - BP, Statoil, Azeri state firm SOCAR and Total - would not give them control over Nabucco, where decisions require a two-thirds majority.

He declined to elaborate on the value of the deal.

Along with BEH, shareholders in Nabucco include Austrian energy group OMV, Hungary's MOL through its gas pipeline operator FGSZ, Turkey's Botas, and Romania's Transgaz.

German utility RWE is currently holding talks to sell its stake in Nabucco to OMV. (Additional reporting by Henning Gloystein in London; editing by Jane Baird)

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UPDATE 2-Putin tells Ukraine to compromise on gas pipelines

* Putin accuses Ukraine of making "strategic error"

* Russia builds undersea pipelines to bypass transit states

* Russia wants Ukraine to join trade zone

* Putin to Brussels for EU summit on Friday (Adds detail, quotes)

By Alexei Anishchuk and Vladimir Soldatkin

Dec 20 (Reuters) - Russian President Vladimir Putin criticised Ukraine on Thursday for its failure to strike a compromise deal on gas supplies, a stance which led to the last-minute cancellation of a visit to Moscow by President Viktor Yanukovich this week.

Russia has been pushing for Kiev to cede control of its gas pipeline network, through which Europe receives around two thirds of its transit supplies of Siberian gas, holding out the prospect of a cheaper gas price for Ukraine in return.

But Yanukovich pulled out of gas price talks with Putin at the last minute on Tuesday, after a Kremlin foreign policy aide said the Ukrainians had argued they needed more time to prepare documents the two sides had planned to sign.

Speaking at a major news conference, Putin said Ukraine had blundered by refusing to lease its gas transportation system to both Moscow and the European Union.

"Our Ukrainian partners made a very big error, just a strategic error, a fundamental one," Putin said in response to a question from a Ukrainian journalist.

"We and the Europeans offered to lease it, without breaking Ukrainian law, leaving this network in the ownership of the Ukrainian state."

Putin also called the need for Ukraine's pipeline system into question at a time when Russia is increasingly seeking to bypass transit countries by building direct, underwater, links to Europe and by developing its capacity to export liquefied natural gas.

"The very existence of Ukrainian gas transportation system is questionable," he said during the news conference, which lasted for over 4-1/2 hours.

Europe relies on Russia to cover a quarter of its gas needs, but over the past decade Moscow has had a series of disputes with its ex-Soviet neighbours - Ukraine and Belarus - that have threatened the flow of its gas exports to Europe.

Last year, Russia shipped 150 billion cubic metres (bcm) of gas to Europe, but volumes have declined this year as buyers increasingly turn to alternatives such as LNG or cheaper gas on the spot market.

CLOSER TO THE KREMLIN

Putin is trying to forge closer ties with the states of the former Soviet Union, whose collapse he has called "the biggest geopolitical catastrophe of the century".

He has already launched a free-trade zone between Russia, Belarus and Kazakhstan, known as the Customs Union. Last year, Belarus received a huge discount on gas - it pays around $170 per 1,000 cubic metres of Russian gas, much lower than the $430 price for Ukraine, which is only an observer of the trade bloc.

Moscow has invited Ukraine to join the Customs Union as part of a newly proposed gas deal, that would cut the price Ukraine pays for its energy intensive economy, which is heavily reliant on exports of steel and grain.

But Kiev, seeking to boost its economic and political ties with Europe, has so far balked at joining the trade zone as that would make it more difficult to eventually follow the path of other ex-communist states to EU membership.

Although Yanukovich has sought to align Ukraine's foreign policy with that of Russia since becoming president - for example, by abandoning the goal of joining the NATO alliance - European integration remains a political priority for Kiev.

Ukraine has cut Russian gas purchases to 27 bcm this year from about 40 bcm in 2011 to save on its import bill. Talks with the International Monetary Fund on a credit line have been delayed because Ukraine has not hiked subsidised gas prices.

Russia is trying to bypass the transit states, having already commissioned the Nord Stream pipeline under the Baltic Sea to Germany, capable of pumping 55 bcm of gas per year.

Gas export monopoly Gazprom has just started work on South Stream, an ambitious project to bypass the transit nations to the south, that would be able to ship 63 bcm/year from mid-decade.

Putin, who travels on Friday to Brussels for a Russia-EU summit, said Russia will soon overcome its dependence on the gas transit states.

He said he did not challenge the legitimacy of a 10-year gas contract signed with Ukraine in 2009 - over which Ukraine's former prime minister, Yulia Tymoshenko, was jailed on charges of abuse of office.

But Putin expressed concern about the upkeep of Ukraine's gas transportation network, saying its existence and future viability were open to question. (Reporting by Alexei Anishchuk; Writing by Vladimir Soldatkin; Editing by Douglas Busvine and Andrew Osborn)

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COLUMN-German wind power irks neighbouring grids: Wynn

By Gerard Wynn

LONDON | Thu Dec 20, 2012 11:48am EST

LONDON Dec 20 (Reuters) - Increasing German renewable power is under-cutting wholesale electricity prices across its borders, which may harm energy investments in neighbouring countries.

The overall picture is of widening impacts on grids across central Europe from the ramp up in German renewables.

German solar power generation was up 47 percent in the first half of 2012 compared with the same period last year, and wind power generation up 21 percent, data from the Fraunhofer Institute show.

One impact from rising intermittent German wind power generation in the north of the country is of electricity spilling into neighbouring networks en route back into southern Germany or Austria, called loop flows.

Another is of rising exports of cheaper, intermittent power, undercutting the economics of baseload power in Germany's neighbours.

Exports of German power to the Czech Republic, for example, are up four-fold in the first 10 months of the year compared with the same period in 2010.

A group of four east European grid operators, from the Czech Republic, Hungary, Poland and Slovakia, has argued to split the Germany-Austria bidding zone, limiting the geographical area across which bidders can purchase wholesale power directly at the same price.

Their stated aim is to tackle loop flows, which they complain are using up grid capacity and destabilising networks.

But another effect would be to reduce competition with cheap, volatile wind power, for example for Czech exports of nuclear power to Austria.

Germany prefers to upgrade its internal grid, which should reduce loop flows.: Chancellor Angela Merkel's cabinet on Wednesday agreed to accelerate such upgrades.

The disagreement is evidence of widening impacts from Germany's decision to shift from nuclear into renewable power.

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Chart 1: link.reuters.com/bav74t

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BIDDING ZONES

At present, bidding areas in European energy markets are largely divided along national borders with exceptions, for example, where Germany and Austria are a single zone. By contrast Italy, Sweden and Norway are fragmented.

Germany and its east European neighbours differ on how to deal with loop flows.

A report prepared for the German grid regulator Bundesnetzagentur last year argued loop flows were a result of a shift towards European Union market integration.

"Loop flows are technically inevitable, they occur irrespectively of the existence of congestion, and they need to be accepted according to EU law. Consequently, the occurrence of loop flows does not constitute a reason for altering the size of bidding areas," said the report - "Relevance of established bidding areas" - prepared by Frontier Economics and Consentec.

Central and east European grid operators disagreed in a report of their own, "Bidding zones definition", in March.

"We strongly believe that fundamental corrections in the definition of bidding zones should be introduced as soon as possible in order to improve the efficiency of coordinated capacity calculation and allocations, as well as to avoid the further escalation of insecure grid operation in the CEE region," the grid operators said.

The report illustrated the difference between scheduled and physical electricity flows across German borders.

The idea is that smaller bidding zones will bring sources of supply and demand closer, avoiding unplanned routes.

The discussion of loop flows hides another, potentially more political issue, however, regarding the trade impact of rising German wind power.

For Germany, exporting wind power via large bidding zones and closer market integration will help the country manage its increasingly intermittent generation.

For the Czech Republic, however, it undermines the country's own export market for baseload generation, and potentially the investment case for majority state-owned utility CEZ to build two new nuclear reactors.

BORDER FLOWS

Germany is a net exporter of electricity to its neighbours in aggregate, the Fraunhofer Institute data show, although that picture varies country by country.

Germany is consistently a net importer from the Czech Republic, according to electricity exchange data from the European Network of Transmission System Operators for Electricity (ENTSOE).

But German exports to the Czech Republic in the first 10 months of this year have risen more than four-fold compared with the corresponding period in 2010, the ENTSOE data show.

Over the same time period Czech exports have been steady, leading to a shrinking export surplus. (See Chart 1)

A trend of rising German exports in the past three years corresponds with renewable power reaching significant levels.

VOLATILITY

Wind and solar power get preferential grid access on the basis of their zero fuel and marginal costs.

The result is lower and more erratic wholesale power prices when German wind is available, not only in Germany but in eastern Europe, according to the European Commission's "Quarterly Report on European Electricity Markets"

"In January 2012 monthly average power prices in the Central East European Region (Czech Republic, Hungary, Poland, Romania, Slovakia, Slovenia) reached their lowest levels since autumn 2010," the first quarter review reported.

"This was mainly due to a milder-than-usual weather and the abundant wind and solar power generation in Germany.

"Price volatility reached particularly high levels in the second half of January when the impact of renewable generation in Germany and rapidly changing demand from the Balkans exerted an influence."

The position of the EU's executive Commission remains to be seen, while it is a strong proponent of free trade and efficiency in power markets.

But the strength of feeling in eastern Europe countries suggests one way or another they will seek to shield themselves from the ramp up in German renewable power. (Reporting by Gerard Wynn; Editing by Anthony Barker)

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KKR joins private equity charge in U.S. water

* Will pay $150 mln upfront with United Water

* Commits an additional $157 mln over a 30-year concession

By Greg Roumeliotis

Dec 20 (Reuters) - Private equity firm KKR & Co LP on Thursday kicked off a joint venture with Suez Environment to run the water and wastewater systems of a New Jersey city it hopes will become a model for cash-strapped local authorities in the United States.

KKR and Suez subsidiary United Water will pay $150 million to the city of Bayonne for the rights to a 40-year concession, allowing them to collect water and wastewater revenues but also requiring them to come up with another $157 million over the life of the contract to manage and upgrade the systems.

The cost of repairing and expanding U.S. drinking water infrastructure will top $1 trillion in the next 25 years, an expense that is likely to be met primarily through higher water bills and local fees, according to the American Water Works Association, a non-profit think tank.

The Environmental Protection Agency estimated in 2007 that the U.S. must invest $390 billion over the next 20 years to update or replace aging wastewater infrastructure.

But the U.S water industry, run for the most part by the public sector, remains highly fragmented, comprising about 52,000 water systems - over half of which serve a population of 500 or less - and 16,000 wastewater facilities.

Concessions such as the one awarded by Bayonne are rare due to political opposition or reluctance from local authorities to give up control of what they see as essential infrastructure, especially when they can tap the municipal bond market for their financing needs.

"We are slowly starting to see more cities looking at these partnerships given all the fiscal pressures they're facing. But for every three cities that evaluate these options seriously, at least two ultimately can't get to the finish line," said Brandon Freiman, a principal at KKR's energy and infrastructure team.

"The one that gets to the finish line generally appreciates that these are win-win deals that are good for all constituents. So while we think that there should be more of these deals, progress has been very slow," Freiman added.

Last week, another private equity firm, Table Rock Capital, said it had finalized a 30-year concession worth more than $300 million, in partnership with Veolia Water, to run the water and wastewater systems of the city of Rialto in California.

Bayonne will pay off over $130 million of its debt with the money it gets from KKR and United Water, cutting its municipal debt burden in half. It will see the two firms take over more than 96 miles of water mains and more than 83 miles of sewers serving the city's 63,000 residents.

Consumers and businesses in Bayonne will see an initial 8.5 percent bump in their water and sewer charges, translating to an additional $5 per month for residential users. Rates will then freeze till January 2015 and then rise annually based on an inflation-linked formula.

"The partnership will invest in our aging infrastructure, and provide resources that the Bayonne Municipal Utilities Authority could not otherwise deliver. Simply put, this transaction will result in a more efficient and reliable water and sewer system for today and future generations," the authority's executive director Steve Gallo said.

Infrastructure investments of such kind usually deliver internal rates of return of a little over 10 percent, lower than those typically seen in the buyouts of companies but much safer in their risk profile.

KKR will fund 90 percent of the joint venture with United Water. Two thirds of the investment will be financed with debt on an average interest rate of about 5 percent.

KKR, which has $66.3 billion in assets under management, is making the investment through a dedicated infrastructure fund pool of $2.4 billion, that includes dedicated accounts with some of its investors.

Nassau County, located on Long Island just east of New York City, and among the wealthiest counties in the U.S., is negotiating a similar water and wastewater concession with United Water to help address its budget deficits.

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Hong Kong shares end near 17-mth highs, China holds at 4-mth peak

(Updates to close)

* HSI +0.2 pct, H-shares -0.3 pct, CSI300 +0.6 pct

* Profit taking hits China banks, BOC off 52-wk high in HK

* Investors rotate heavily into HSBC, StanChart

* 4th straight gain buoys Galaxy Entertainment to record high

By Clement Tan

HONG KONG, Dec 20 (Reuters) - Hong Kong shares ended at their highest level in nearly 17 months on Thursday trade, as investors rotated into HSBC Holdings and Standard Chartered after taking profits in Chinese banks that outperformed recently.

Onshore Chinese markets reversed midday losses to crawl higher, holding at four-month highs for a fifth-straight session on strength in resource counters after state media reported rare earth quotas will stay steady in 2013.

The Hang Seng Index closed up 0.2 percent at 22,659.8, reversing midday losses to stay at its highest since Aug. 1, 2011, but trading volume was low. Chart resistance is next seen at about 22,800, peaks last seen in July-August 2011.

The China Enterprises Index of the top Chinese listings in Hong Kong slipped 0.3 percent.

In the mainland, the CSI300 of the top Shanghai and Shenzhen listings gained 0.6 percent to 2,384.8. The index is now up 1.7 percent in 2012 having spent most of the year in negative territory. It next faces chart resistance at around 2,412, the peaks seen in August this year.

The Shanghai Composite Index edged up 0.3 percent.

Both onshore Chinese indexes reversed midday losses, staying at their respective highest since August.

Shanghai volume improved slightly from Wednesday, but totalled just more than half of last Friday's when onshore Chinese markets had their best day in more than three years.

Hong Kong turnover was at its second weakest since Dec. 4 and was some 7 percent below its average in the last month as doubts reemerged over progress on averting a fiscal crisis in the United States.

"Trading at this time of the year can be quite tricky," said Jackson Wong, Tanrich Securities' vice-president for equity sales. "Investors are rotating out of outperformers today and into some laggards on some Chinese policy catalysts."

Chinese banking plays that have overperformed were weak in both China and Hong Kong markets. Sentiment toward banks took a knock after the mainland's banking regulator ordered them to tighten checks on sales of third-party financial products.

Having touched 52-week intra-day highs twice earlier this week, Bank of China (BOC) slipped 0.6 percent in Hong Kong, and 0.7 percent in Shanghai.

Growth-sensitive counters were also weak. Anhui Conch Cement slid 2.9 percent in Hong Kong, recording a third-straight daily loss after hitting its highest intra-day levels on Monday since November 2011.

In Shanghai, Anhui's shares shed 1.2 percent.

CHINA POLICY PLAYS STRONG

Inner Mongolia Baotou Steel Rare-Earth Group jumped 6.9 percent after the state-owned China Daily reported industry leaders as saying export quotas for rare earth metals will hold steady next year.

Strength in other rare earth producers helped onshore Chinese indexes reverse midday losses, with the CSI Materials sub-index an outperformers among sectors, rising 1.5 percent.

Chinese alternative energy counters extended gains after mainland news outlets reported on Wednesday that Beijing approved a second group of wind power projects.

The state-run China Securities Journal newspaper reported on Thursday that the State Council has issued new measures to support the solar industry, including subsidies and tax breaks to also benefit the wind power industry.

China Longyuan Power Group climbed 2.5 percent in heavy volume in Hong Kong, but it is still down 12.4 percent on the year, compared to the 22.9 percent gain on the Hang Seng Index.

Galaxy Entertainment Group jumped 4 percent to a record closing high, posting a fourth-straight daily gain after Deutsche Bank analysts upgraded on Monday its target price by 5.4 percent. (Editing by Simon Cameron-Moore)

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UPDATE 1-Enel wants more cash, more time for Slovak plant -PM

(Adds further comment from Enel)

BRATISLAVA Dec 19 (Reuters) - Enel wants more cash and more time to build two new units at the Mochovce nuclear plant in Slovakia, the country's prime minister said, describing the Italian utility's demands as "unacceptable".

Prime Minister Robert Fico, in power since April, said the Italian company wanted an extra 800 million euros ($1.1 billion) and expected construction work to go on for another 22 months.

Mochovce, operated by Slovak power company Slovenske Elektrarne, was originally expected to start commercial operation of the first new reactor by the end of this year and the next one in 2013.

Enel has a 66 percent stake in Slovenske Elektrarne, while the government holds the remaining 34 percent.

In March Enel pushed back the start of the third Mochovce unit to the end of 2013, while the fourth unit was supposed to follow eight months later.

Fico said the government had instructed its representatives on the board of Slovenske Elektrarne to object to Enel's call for additional funds, adding the economy ministry would draft a study by mid-January on the completion of Mochovce.

"(The) Italian investor keeps asking for more money, there is a proposal to boost costs of completion of the third and fourth blocs by around 800 million euros, which is absolutely unacceptable," Fico told reporters after a government meeting.

Enel said: "Slovenske Elektrarne is fully covering the costs associated with the design modifications and improvements with its own sources, and will not request any additional money from the state budget."

The Milan-based utility cited the need to meet significant international safety measures brought in after the March 2011 Fukushima disaster in Japan as key reasons for the delay at Mochovce, with costs originally estimated at 2.8 billion euros.

"Given the complexity of the new upgraded design of the reactors in Mochovce, the necessity to reorganize industrial infrastructure and the results of the EU's stress tests, the project had to be rescheduled," it added in an emailed statement.

Slovenske Elektrarne already operates two units at Mochovce and another two at its Jaslovske Bohunice power plant, with a total 1,950 megawatts of installed capacity.

In January all four nuclear reactors in Slovakia passed so-called stress tests against potential severe accidents, earthquakes, floods and other extreme events.

The analysis followed the Fukushima disaster, which spurred the European Union to mandate safety tests of its 143 reactors.

($1 = 0.7568 euro) (Reporting by Martin Santa; Editing by Helen Massy-Beresford)

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