French public works group Vinci risks losing a 1 billion euro ($1.4 billion) rail communications project due to uncertainty over the future of insolvent supplier Nortel Networks Corp.

After a three-month delay in signing the contract, French rail authority Reseau Ferre de France (RFF) has set a deadline of about a month for Vinci to raise financing and finalise commercial and financial agreements on the public-private partnership (PPP) project, an RFF source said.

So far banks have proven reluctant to lend to the project because of worries over whether Nortel will be a reliable supplier.

RFF has given the consortium until the end of September or beginning of October to close the project. Unless the issue is resolved, RFF will look to advance the project under a different framework (other than a PPP with Vinci), the source said.

Nortel sought bankruptcy protection in January and the concerns of potential lenders to the project were compounded in May when the troubled group asked for its French research and development unit to be liquidated.

Last month a Versailles court gave Nortel a new deadline of Nov. 20 to find a buyer for this French unit.

The sale of Nortel's GSM telecommunication operations, in which this unit is involved, is key to unlocking progress on Vinci's rail project.

Since Nortel was placed under chapter 11, it has been difficult to finalise the deal and this will remain the case as long as RFF doesn't know what will happen to Nortel's unit, Vinci Chief Executive Xavier Huillard told Reuters on the sidelines of the company's first-half results conference in Paris on Tuesday.

The contract is RFF's first PPP scheme and calls for a new telecommunications network to span some 14,000 kilometres of rail track in France. Vinci is the preferred bidder together with telecoms firm SFR and AXA Investment Managers Paris.

Vinci's consortium won the project in February but did not sign its contract in June as originally planned, setting back construction which is to last five years.

The project has won support from the European Investment Bank, which is contributing close to 300 million euros, as well as from the Caisse des Depots et Consignations, which has agreed to finance 25 percent.

(Editing by David Holmes)

 ($1=.7023 Euro)