* Says to cut operational costs by 6 bln SEK
* To focus on Swedish, German, Dutch markets
* Eyes non-core asset sales, including Poland and Denmark
* Scales back investment to 165 bln SEK over 5 years
* Most job cuts to come without compulsory redundancies
(Adds detail, background)
By Mia Shanley and Victoria Klesty
STOCKHOLM, Sept 21 (Reuters) - Swedish power group Vattenfall is to slash costs, sell non-core assets and cut investments in a major revamp it hopes will help it tackle tough competition and satisfy demand for renewable energy.
Following a flurry of acquisitions, Europe's fifth-largest electricity producer said it would focus on improving its existing operations for the next few years and aimed to cut total costs by 6 billion crowns ($853.9 million) by 2014 to boost profits and reduce debt.
"We have to improve our balance sheet and our profits," Chief Executive Oystein Loseth told a news conference. "We will need two to three years to do this -- then we will be ready for growth again."
The company, which has operations across much of northern Europe, said its cost-cutting programme would lead to a reduction of headcount, though it aimed to achieve this mainly without compulsory redundancies. It did not say how many jobs would go but said its targeted cost cuts would represent 10 to 12 percent of its total costs today.
Vattenfall said it would stick to core markets in Sweden, Germany and the Netherlands and added there were growth opportunities in renewable energy in Britain.
Loseth said the firm's new strategy would help it address price and margin pressure as a result of new production and weaker demand, as well as a big shift in Europe into more sustainable energy sources over the next decade.
The state-owned firm, which is unlisted but is a big borrower on the credit market with net debt at the end of 2009 of some 156 billion crowns ($22 billion), will investigate divestment opportunities in non-core areas such as Poland and Denmark, though it gave no details about potential sale proceeds.
It still wants to sell its share of eastern German gas supplier Gasag after calling off the sale of its combined stake with E.ON AG in May because of low bids.
However, speculation of the company selling out of Germany was wrong, Loseth said.
RENEWABLE ENERGY
Vattenfall, which last year carried out its biggest-ever acquisition with the purchase of the production and supply arm of Dutch utility Nuon, plans to slash investments over the next five years to 165 billion crowns starting in 2011, having previously planned to spend 201 billion in the five year period which began this year.
It wants to cut its emissions by one-third over the next decade and sees new growth opportunities in power production such as wind, nuclear, biomass, hydro and gas power.
An investment in nuclear power in the United Kingdom is not currently being considered though it could be down the road, Loseth said, adding it was too early to speculate about new nuclear projects in Germany.
The German government agreed this month to extend the lifespan of nuclear power plants by an average of 12 years.
Vattenfall posted second-quarter operating profit of 8.96 billion Swedish crowns, up 52 percent from a year earlier on strong demand for power.
But Loseth, in his post for less than a year, has said repeatedly that the firm -- mandated to deliver a market rate of return by the government -- must become more profitable.
Sweden's centre-right government, which beat the centre-left opposition in Sunday's general election but lacks a majority in parliament, has said it could consider allowing investors to take a minority stake in Vattenfall, but has ruled out breaking up the energy group.
Loseth said he would not speculate about how a minority government could potentially impact the firm. (Editing by David Holmes) ($1=7.026 Swedish Crown)