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UPDATE 2-Australia's AGL Energy to split in push to attract new investors

* New AGL would be retail focused

* PrimeCo would be a bulk power generator

* Shares drop 3.5% after state rebuffs LNG import plan (Recasts with CEO, fund manager comments)

MELBOURNE, March 30 (Reuters) - Australia’s top power producer and energy retailer AGL Energy on Tuesday unveiled a plan to split into a bulk power generator and a retail business, in a bid to revive its battered shares and lure investors who shun coal.

The move comes after a 35% slump in its shares over the past year made AGL the third worst performer among Australia’s top 200 companies.

AGL, Australia’s biggest polluter, has been weighing an overhaul as wholesale power prices have nearly halved over the past three years with an influx of wind and solar power. At the same time the government has forced power retailers to cut prices and investor appetite for coal-fired power has waned.

“What we are doing here is recognising that markets are evolving and evolving rapidly,” AGL Chief Executive Brett Redman told analysts.

The aim is to create two businesses - New AGL and PrimeCo - each with a different focus within the transition to cleaner energy.

New AGL would be a carbon neutral retailer delivering electricity, gas, internet and mobile services, while owning flexible power assets such as gas-fired power plants and batteries.

PrimeCo would hold the company’s coal-fired power plants and wind farms, supplying New AGL, other retailers, aluminium smelters, and other industrial customers.

“It has strong cashflows, and you would expect it would have a strong yield as well,” Redman told Reuters.

Analysts were unable to assess what the two companies would be worth as AGL, which has a market capitalisation of A$6.1 billion ($4.7 billion), has yet to decide on their capital structure.

A fund manager said in the near term it’s too hard to invest in AGL, with the government threatening to build new power plants, which could lead to an oversupply of power.

“In the short term, you’ve got a clear and present danger with what the government’s doing,” said Jason Teh, chief investment officer at Vertium Asset Management.

AGL’s shares rose as much as 3.3% after unveiling the plan but then slid 3.5% after the state of Victoria rejected AGL’s separate proposal to build a liquefied natural gas (LNG) import terminal.

$1 = 1.3079 Australian dollars Reporting by Sonali Paul; Additional reporting by Rashmi Ashok in Bengaluru; Editing by Anil D’Silva and Richard Pullin

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