Crisis for Areva's La Hague plant as clients shun nuclear

* Areva reprocessing sales shrink further post Fukushima

* La Hague plans to cut costs, boost investment

* EDF (Paris: FR0010242511 - news) , now its sole big customer, negotiates lower prices

* Areva hopes to win new customers in South Korea (Adds background on reprocessing in other countries)

By Emmanuel Jarry

BEAUMONT-HAGUE, France, May 6 (Reuters) - Areva's nuclear fuel reprocessing plant in La Hague needs to cut costs as its international customers disappear following the Fukushima disaster, and its sole remaining big customer, fellow state-owned French utility EDF, pressures it to cut prices.

Located at the westernmost tip of Normandy, La Hague reprocesses spent nuclear fuel for reuse in nuclear reactors and is a key part in Areva's production chain, which spans uranium mining to fuel recycling.

Its valuation and outlook are crucial for the troubled French nuclear group, which is racing to find an equity partner after four years of losses have virtually wiped out its capital.

"Our ambition is to cut costs by more than 15 percent over five years," La Hague director Pascal Aubret told Reuters.

Areva said in January it would have to cut about 100 jobs at La Hague, which employs 3,100 people, plus another 1,000 Areva staff working for other Areva units and some 1,000 contractors.

The La Hague plant is also planning more separate savings, part of a company-wide plan to cut costs by one billion euros by 2017.

One of the world's biggest nuclear waste storage facilities, La Hague's four pools hold the equivalent of about 50 reactor cores under four metres of water.

Protected by 1.5 metre thick anti-radiation concrete walls, employees in space suits cut up spent nuclear fuel rods, extract uranium and about one percent of plutonium, and melt the remaining waste into glass for eventual deep storage.

Areva says reprocessing reduces natural uranium needs by 25 percent. But opponents say that separating plutonium from spent nuclear fuel increases the risk of nuclear proliferation.

As long as plutonium remains locked in the spent uranium it remains a bulky and highly radioactive substance that is dangerous to handle and difficult to transport. Once separated out, its volume and radioactivity are much reduced, although it remains highly toxic.

Britain's Sellafield is the world's only other major reprocessing facility besides La Hague. Its two reprocessing plants are scheduled to close in 2017-18. The United States does not reprocess nuclear fuel and Russia and India have only small facilities with a capacity of a few hundred tonnes per year.

Areva has an agreement with China to help build a reprocessing plant, but progress has been slow and no date for completion has been set.

A planned reprocessing plant in Rokkasho, Japan - modelled on La Hague - has been plagued by problems and is years behind schedule. With all of Japan's reactor's closed following the 2011 nuclear disaster in Fukushima, its future is unclear.

The Fukushima disaster has also been a blow for La Hague, which has lost nearly all of its remaining international customers.

The company's "back-end" sales - which include reprocessing, logistics and decommissioning - have fallen to 1.53 billion euros in 2014, 18 percent of Areva's turnover, from 2 billion euros, 30 percent of nuclear revenue, in 2004.

EDF SQUEEZE

In the past decades, more than 32,000 tonnes of spent nuclear fuel has been reprocessed at La Hague, of which nearly 70 percent was for EDF, 17 percent for German utilities, 9 percent for Japanese utilities and the rest for Swiss, Belgian, Dutch and Italian clients.

This year, La Hague expects to treat 1,205 tonnes of spent fuel, of which just 25 tonnes will come from abroad. That leaves Areva with EDF virtually as its sole customer, and although both firms are state-owned - Areva 87 percent, EDF 85 percent - EDF has played hardball in contract negotiations.

La Hague extracts plutonium from used nuclear fuel, which it then sends to Areva's Melox plant in southeast France, which produces MOX fuel - a mixture of plutonium and spent uranium - for EDF reactors.

The arrival of new management at both companies since the start of the year has ended years of hostility between France's two nuclear champions, but a 6.5 billion euro contract to treat and recycle 1,100 tonnes per year of EDF's spent fuel for the 2013-2020 period has still not been signed.

Labour union sources and local socialist parliament member Geneviève Gosselin-Fleury told Reuters that EDF wanted Areva to treat the 1,100 tonnes per year for the same price it treated 950 tonnes per year under the previous contract.

In its 2014 earnings statement Areva said that "commercial concessions" given to EDF had forced it to take a 105 million euro writedown on its La Hague and Melox plants.

La Hague director Aubret said the reprocessing contract was a key element in talks with EDF, which is considering taking a stake in Areva's reactor business.

He added that alongside its cost-cutting plan, Areva aimed to double its investment in La Hague to 200 million euros per year for nearly 10 years, in order to renew ageing equipment and boost capacity of its nuclear waste storage pools.

The plant also hopes to attract new foreign clients, notably South Korea, which has a growing nuclear industry but is not allowed to have its own reprocessing installations under a U.S.-Korea treaty. (Writing by Geert De Clercq; Editing by Sophie Walker and Peter Graff)