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UPDATE 2-Australia's AGL facing stiffer headwinds, weighs overhaul

* Rapidly falling power prices force AGL to rethink business

* H1 profit drops 27%, in line with consensus

* FYH21 EBITDA seen down as much as 23% on year earlier

* AGL has no plans to speed up coal-fired plant closures (Recasts throughout with CEO, CFO comments)

MELBOURNE, Feb 11 (Reuters) - Australia’s top power producer and energy retailer AGL Energy Ltd is weighing how to reshape itself as it faces ever growing challenges, with an influx of wind and solar power hammering its energy market earnings faster than expected.

Chief Executive Brett Redman did not rule out splitting off AGL’s retail business, saying the company was considering all options as it responds to rapidly evolving technology, customer needs, government policies and community expectations.

“As we’ve said for some time, it is the speed with which those forces change that will dictate the velocity of our strategy,” Redman told analysts on a results call on Thursday.

“What we have seen in recent months is an acceleration of all of those forces beyond what we anticipated.”

He said AGL would outline its new strategy in late March.

The company said it expected earnings before interest, tax, depreciation and amortisation to be between A$1.59 billion and A$1.85 billion ($1.23 billion-$1.43 billion) for the year to June 2021, down as much as 23% from a year earlier. That compared with a broker consensus of A$1.76 billion.

Half-year underlying profit dropped 27% to A$317 million, in line with estimates, due to falling power prices and weaker gas margins, partly hit by weaker demand during the COVID-19 pandemic and outages at a coal-fired plant.

Longer-term, power prices have slumped due to a slew of new wind and solar farms, which have driven wholesale power prices below zero more regularly.

Government plans to back new gas-fired and renewable power to shore up supply ahead of the closure of AGL’s Liddell coal-fired plant in 2023 have worsened the price outlook for generators.

To cope with the slide, AGL aims to cut A$150 million in operating costs by June 2022 and A$100 million in sustaining capital costs by June 2023.

Even with the falling prices, the company does not plan to speed up the closure of its coal-fired plants, with the last one still due to close in 2048.

“We have some of the lowest cost, best assets in the market. So even at suppressed pricing, our assets will probably be in the market longer than others,” Chief Financial Officer Damien Nicks told Reuters.

$1 = 1.2953 Australian dollars Reporting by Sonali Paul; Additional reporting by Arpit Nayak and Arundhati Dutta in Bengaluru; Editing by Aditya Soni and Amy Caren Daniel

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