News: ORG UPDATE 1-Australia's AGL slashes dividend as profit drops on power price slump

(Adds details, background)

Feb 10 (Reuters) - AGL Energy Ltd (AGL) reported a 41% drop in first-half profit on Thursday and slashed its dividend by nearly a third as the Australian power producer took a hit from a slump in wholesale electricity prices.

Government pressure to cut retail rates, waning investor appetite for coal-fired power and an influx of solar and wind energy into the grid have in recent years ratcheted up pressure on AGL and its peer Origin Energy (ORG) .

But the company said power prices have improved in the last six months and a continuation of that trend could support its future earnings beyond fiscal 2022.

AGL also raised the lower end of its fiscal 2022 profit forecast, narrowing the range to A$260 million to A$340 million from A$220 million to A$340 million previously.

The company said its underlying profit, which omits one-off items, came in at A$194 million ($139.33 million) for the six months to Dec. 31, compared with A$328 million a year ago. The figure beat a Morgan Stanley estimate of A$169 million.

AGL declared an interim dividend of 16 Australian cents per share, compared 41 Australian cents a year ago.

($1 = 1.3924 Australian dollars)