UK insurers plan to invest 25 bln pounds in infrastructure

* Government on drive to boost private-sector investment

* Power stations and transport infrastructure stretched

* No commitment yet from insurers to specific projects

By David Milliken

LONDON, Dec 4 (Reuters) - British insurers plan to invest 25billion pounds ($41 billion) in transport and energy projectsover the next five years, the finance ministry said onWednesday, a day before it presents a half-yearly economicupdate.

Boosting private-sector infrastructure investment is apriority for Britain's government, as an unexpected rebound ingrowth so far this year has been driven mostly by consumerspending, which is unsustainable in the long run.

Many British power stations are due for replacement in thecoming years, roads, railways and airports are overcrowded. Deputy finance minister Danny Alexander said the new investmentwas "a massive vote of confidence in the UK economy" and wouldhelp fund the 100 billion pounds of investment projects over thenext seven years that he announced in June.

Critics said the Conservative-Liberal Democrat coalition haderred by slashing public investment after it took power in 2010in order to cut the budget deficit which totalled 11 percent ofgross domestic product when the coalition came to power.

"Scheme after scheme has been announced to great fanfare butthen little actually delivered," said Chris Leslie, a lawmakerand finance spokesman for the opposition Labour Party.

While the government says borrowing more to fund investmentwould endanger market confidence in its public finances, somecritics say it would be cheaper in the long-run to finance someprojects through issuing more public debt.

Infrastructure projects attract insurers because they offerthe prospect of an inflation-linked return, often with agovernment guarantee, that helps them meet life insurance andpension liabilities.

In addition, one of the six insurers involved, Legal &General, said recent changes to a European Unionregulation known as Solvency II made such investment easier.

"The terms ... are now fixed so as to permit long-terminfrastructure investment without excessively onerous capitalrequirements," said Legal & General Chief Executive NigelWilson.

The other five insurers who have committed to the 25 billionpounds in investment are Prudential, Aviva,Standard Life, Friends Life and Lloyds Banking Group unitScottish Widows.

The insurers have not yet committed to specific projects,and Legal & General said it wanted to invest partly in realestate projects that are part of the government's plans.

Britain's finance ministry said it now aimed to oversee 375billion pounds of major infrastructure investment over the next20 years, up from 309 billion pounds last year.

Projects include the construction by Japan's Hitachi of a new nuclear power station in north Wales - whichthe government said on Wednesday would receive a publicguarantee to shield private-sector investors from some of therisk of the project.

The government also said it would provide a guarantee for a1 billion pound extension of London's overcrowded undergroundsystem, as well as other rail and road projects.

It added that it intended to sell its stake in the Eurostarcross-channel rail link by 2020.