UPDATE 1-Alcoa, unions agree on investments for Italy units

* Agreement on temporary curb to Fusina output

* Portovesme to get 60 mln euros, Fusina gets 35 mln euros

* Alcoa expects European Commission decision next week (Adds Alcoa comments on spending breakdown, EU decision)

MILAN, May 18 (Reuters) - U.S. aluminium producer Alcoa Inc (AA.N) and Italian trade unions have struck a 95 million euro ($118 million) investment deal for Alcoa's two Italian plants -- a sign of Alcoa's will to keep these units open, unions said.

Under an agreement reached on Monday and seen by Reuters, Alcoa and powerful metals industry unions also agreed to a temporary halt of the Fusina aluminium smelter near Venice.

Last November, Alcoa said it would temporarily idle its 194,000 tonne-per-year smelters at Portovesme and Fusina after the European Commission ordered it to pay back most of the state aid it had received in Italy since 2006. Alcoa has complained about high power prices in Italy.

"The company confirms its will to remain in Italy with two production sites," said the agreement signed by top managers of Alcoa's Italian unit and senior representatives of metal workers' unions.

Alcoa plans to spend 60 million euros on its Portovesme plant on the island of Sardinia in 2010-2012 to boost its competitiveness, return to full operating capacity and replace some units. The plan for Portovesme also foresees cost cuts.

"We will spend 60 million euros (on Portovesme), out of which 20 million will be capital expenditure, or real investments," Alessandro Profili, head of institutional relations for Alcoa in Europe, told Reuters.

Another 20 million euros will be spent to return the plant to full operating capacity by restarting pots which were stopped last year and 20 million euros more will be spent to replace pots over the next three years as their working life expires, he said.

Alcoa would also spend 34.6 million euros on its Fusina plant which employs about 400 people and where output of primary aluminium would be temporarily suspended until supply of electricity improved.

Fusina's investment plan includes 25 million euros to improve its production capacity, and on top of that about 10 million euros will be earmarked for extraordinary maintenance while the smelter is stopped, Profili said.

Alcoa's plan for the Fusina smelter, which employs about 100 people, does not foresee layoffs since workers would either be assigned to smelter maintenance or transferred to the associated rolling mill. Others were expected to take voluntary early retirement.

In March, Italy's parliament approved a power decree offering favourable conditions to some industrial consumers to convince Alcoa to keep its Italian plants working.

Aloca's plans for Portovesme depend on the EU Commission approval as well as on achieving a competitive energy price for three years, which are required conditions to keep the plant operational, Profili said.

"We are very close to the approval (from the Commission). We have good hope that the final approval will be obtained by the end of next week," he said.

Alcoa is yet to strike a three-year contract with its power supplier, Italy's biggest utility Enel (ENEI.MI), he said. ($1=.8054 Euro) (Reporting by Svetlana Kovalyova; editing by Amanda Cooper)