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By Cecile Lefort
April 29 (Reuters) - France will lend up to 200 million euros ($228 million) to support struggling New Caledonia nickel producer Societe Le Nickel (SLN), Prime Minister Manuel Valls said on Friday.
Valls, who is visiting the French territory, said the financing will be in place until 2018 with final terms still under discussion.
The aid package comes at a time when nickel prices are hovering near 13-year lows. The mineral is crucial to New Caledonia as it accounts for about a fifth of its economy.
Earlier this year, the territory lost a key Australian customer which fell into insolvency.
"The situation is serious," said Valls. "SLN is facing an unprecedented crisis."
SLN, a unit of French government-owned Eramet, has seen the average cash cost of nickel production drop 10 percent compared with the 2015 average.
Valls also committed to support the replacement of an ageing electricity plant for SLN's smelter.
The French territory has two other smelters, owned by Glencore, Vale.
New Caledonia holds around a quarter of the world's reserves of nickel, used in everything from stainless steel to batteries.
New Caledonia had until recently resisted selling ore directly to large consuming countries such as China, hoping to protect its local smelting industry.
But in a change in policy, the government earlier this month said SLN and another company were free to sell a combined amount of up to 700,000 tonnes of low-grade nickel ore, known as laterites, to Chinese buyers over a period of 12 to 18 months.
Eramet has already unveiled plans to sharply reduce production costs at SLN over the next two years to cope with a severe downturn in the global market as appetite for metals falters in top consumer China, with many producers operating at a loss. ($1 = 0.8778 euros) (Reporting by Cecile Lefort in SYDNEY; Editing by Ed Davies)