UPDATE 1-Spain Union Fenosa to sell stake in Nicaragua unit

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MANAGUA, April 14 (Reuters) - Spanish utility Union Fenosa will sell 16 percent of its Nicaraguan unit to the Central American country's government, a company official said on Monday, wiping out $10 million in debt the company had with Managua, the capital city.

"There is already a tacit deal," an executive from the company told Reuters. "It will be signed by April 30."

Nicaragua, which has a precarious power system, suffers from daily blackouts across the country. Union Fenosa (UNF.MC: Quote, Profile, Research) enjoys a virtual monopoly in the power distribution in Nicaragua since 2000.

Leftist President Daniel Ortega has blamed Fenosa for the blackouts in the impoverished Central American nation.

Ortega's ally Venezuelan President Hugo Chavez has nationalized various industries but the Nicaraguan leader, a former guerrilla, has not gone down that road.

Nicaragua said in October it authorized Union Fenosa to raise electricity tariffs by 9.06 percent, to allow the Spanish utility firm to keep up with higher fuel costs. (Reporting by Ivan Castro; editing by Gunna Dickson)