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Norway's Statnett welcomes UK power link rule proposals

OSLO, May 26 (Reuters) - Proposed UK regulations on operating power links to Europe have boosted the chances of building the first power connection between Britain and Norway, state-owned Norwegian power grid company Statnett said on Monday.

Statnett and Britain's National Grid (LSE: NG.L - news) are planning to build a 1,400-megawatt (MW) interconnection between Kvilldal in Norway and Blyth (NYSE: BTH - news) in Britain by 2020. At more than 700 km, it will be the world's longest subsea cable if built.

The Norwegian government, which still has to approve the project, has voiced doubts in the past on whether it would be profitable to build the cable, rising the possibility that it could be delayed or cancelled.

Last Friday, Britain's energy market regulator Ofgem called eight-week consultations on the proposed rules setting minimum revenues from cross-border power links.

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The planned interconnector between Norway and Britain will fall under the new regulations, Statnett said in a statement.

"We still need a few more clarifications, both concerning this solution and other market solutions in the UK, before we can make an investment decision, but it enhances the likelihood of realising the project," said Christer Gilje, Statnett's spokesman for the cable project.

The proposed regulatory framework will secure minimum revenues to the cable developer, reducing the investment risk, Statnett said.

National Grid is planning new subsea links with Norway, France and Denmark, in addition to a link to Belgium. Construction of the Belgian link is expected to start in 2015.

The new links would allow more power to be traded with continental Europe, where prices are lower, especially in the Nordic (SES: MR7.SI - news) countries, which generates about half of its electricity from low-cost hydropower.

Statnett, which will own 50 percent of the UK interconnector cable, estimates its investment in the project at 6 billion to 8 billion Norwegian crowns ($1.01-$1.34 billion), and plans to make the final investment decision later this year. ($1 = 0.5938 British Pounds) ($1 = 5.9589 Norwegian crowns) (Reporting by Nerijus Adomaitis; editing by Keiron Henderson)