* Says some clients would be unhappy with EDF board seats
* No comment on capital increase negotiations
(Adds detail, background)
PARIS, Nov 24 (Reuters) - French nuclear engineering group Areva has warned that some of its utility clients could have a problem with their competitor EDF taking seats on its supervisory board.
Although state-owned Areva would not be opposed to EDF hiking its 2.4 percent stake as part of a capital increase, Areva Chief Executive Anne Lauvergeon said some utility clients would be uncomfortable with a rival having strategic input.
"I would be delighted to see EDF take part in our capital increase but there is a clear limitation," Lauvergeon told a French Senate hearing on Wednesday.
"If EDF was to have a place in Areva's governance with one or two seats, its competitors, our clients, would claim there is no longer free competition."
It is unclear how big a stake EDF would need to own in Areva before it could seek supervisory board seats.
Areva is planning a capital increase which it hopes will raise up to 3 billion euros ($4.02 billion) to finance future development projects.
One idea being considered is for EDF to take a larger stake in the nuclear reactor maker either via the capital increase or at later stage.
The French presidency favours stronger ties between EDF and Areva to help the country win international nuclear reactor tenders after a national industrial consortium lost a $40 billion contract in Abu Dhabi last year.
Lauvergeon, who has clashed with EDF's chief Henri Proglio over the embarrassing loss, favours either floating more of Areva's shares on the stock exchange or inviting independent investors to fill Areva's coffers.
Areva has been talking to the sovereign wealth funds of Qatar and Kuwait and Japan's Mitsubishi Heavy Industries in the hope of sealing their investment by the end of the year.
Last week, EDF Chief Financial Officer Thomas Piquemal said his company was not in talks to participate in the increase but that it was still discussing industrial issues with Areva.
Areva's Lauvergeon declined to elaborate on the state of the capital increase negotiations.
($1=.7466 Euro)
(Reporting by Matthias Blamont and Benjamin Mallet; Editing by Erica Billingham)