Iberdrola in talks to exit UK nuclear consortium

* Westinghouse seen buying out Iberdrola (Other OTC: IBDRY - news) 's NuGen stake

* GDF Suez keen to be operator of Sellafield plants-source

* Investment decision, schedule await UK power market reform

MADRID/PARIS, Sept 20 (Reuters) - Spanish utility Iberdrola (Madrid: IBE.MC - news) , which has announced a huge asset sale to pay down debts, is in talks to sell off its 50 percent stake in British nuclear consortium NuGen to Toshiba-owned nuclear plant builder Westinghouse, a source with knowledge of the talks told Reuters on Friday.

NuGen, a joint venture of Iberdrola and French utility GDF Suez, owns a site at Sellafield on the remote northwest coast of England where it plans to build 3.6 gigawatt (GW) of nuclear capacity.

Britain has an ambitious nuclear new build programme to replace aging and polluting power plants by the middle of next decade and says it is keen to encourage investment.

But regulatory changes after Japan's Fukushima accident and squabbles about how much public money should be handed to companies for new plants have slowed down progress.

Discussions between the British government and French utility EDF (Paris: FR0010242511 - news) , which plans another nuclear plant in south-western England, have dragged on for more than a year over the guaranteed price to be paid to producers of electricity from new nuclear plants.

Iberdrola is immersed in a strategy to sell 2 billion euros of assets by 2014 to cut debt, but has said it plans to focus new investments in the UK.

It was not immediately clear why the Spanish utility, which owns Scottish Power, one of Britain's top six utilities, would want to offload the NuGen stake.

NuGen has owned the Sellafield site for nearly four years but has made little progress compared with EDF's Hinkley Point C scheme and projects at Wylfa and Oldbury, bought last year by Japan's Hitachi (Other OTC: HTHIF - news) .

Toshiba-Westinghouse has strong ambitions to sell nuclear plants abroad after the Fukushima disaster put a damper on plans to build new reactors in Japan and enjoys strong government backing as well as financing.

"Iberdrola wants to sell its 50 percent stake. It has been in talks with Westinghouse but as things stand right now it is not a done deal," a source with knowledge of the negotiations said.

A deal could be announced as early as next week, said the source, who declined to be identified.

The Financial Times said on Friday Westinghouse also wants to buy part of GDF Suez's 50 per cent stake.

"Nothing has been decided at this time," a Toshiba spokesman said. GDF Suez declined to comment.

An industrial source told Reuters that while GDF Suez would welcome new partners in the NuGen consortium, the French utility is keen to become sole operator of the nuclear plants.