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* Cutting dividend payouts by 30 percent
* New CEO reviews strategy after profits fall
* Two British power plants to close (Updates throughout)
By Susanna Twidale
LONDON, Feb 19 (Reuters) - Britain's largest utilityCentrica Plc said lower gas prices and demand wouldforce it to slash its dividends and hit profit this year,sending its shares sharply lower on Thursday.
Iain Conn, who took over as Centrica chief executive only inJanuary, announced a review of strategy after the companyreported a 35 percent drop in profits, worse than forecast, and shelved plans to sell assets after failing to find buyers.
The company cut its full-year dividend for 2014 by 21percent to 13.5 pence and said future payouts would be down by30 percent.
Centrica, which owns energy supplier British Gas, has seenits profits squeezed by a slump in global oil and gas prices anddwindling demand for gas from British households after thecountry had the warmest year on record in 2014.
Conn, former head of marketing and refining for BP,said Centrica had to cut spending because there was "nocertainty" oil prices would rebound to previous highs. Helikened the recent oil price slump to 1986 when prices hit $10after Saudi Arabia ramped up production.
"2014 was not the year we had planned. When the oil pricemoves so quickly you end up stuck with $100 costs and $50revenues. So your returns are completely compressed," Conn toldBBC Radio.
Centrica said it expected earnings to be lower this yearthan in 2014. The company is cutting its 2015-2016 explorationand production (E&P) budget by 40 percent to 650 million pounds.
Shares in the company, traded more than eight percent lowerat 1200 GMT, the biggest loser in the FTSE 100 shareindex.
BLOW FOR SHAREHOLDERS
"For investors, and in the current ultra-low interest rateenvironment, the cut to the dividend payment is a major blow,"said Keith Bowman, equity analyst at Hargreaves LansdownStockbrokers. "The search for income yield is becoming everharder," he added.
Utilities across Europe have been hit by weak energy marketsthat have made their power plants unprofitable, lowered theirupstream margins and reduced their retail earnings.
The low commodity prices led to a post-tax impairment chargeof 1.4 billion pounds on its E&P and power assets.
The firm had already announced a tighter 2015 capitalexpenditure programme in November when it lowered expectations for 2014 earnings due to mild weather and reduced output atnuclear plants.
Since then, low oil prices have had a knock-on effect onCentrica's upstream business, which mainly produces gas.
Plans to sell three of its large combined-cycle gas turbine(CCGT) power plants, announced last May have also been droppedafter bids fell short of expectations.
The 665 megawatt (MW) Killingholme gas plant, which was upfor sale, will now be closed, along with the 260 (MW) GlanfordBrigg power plant, both of which are in north-east England.
Both plants missed out in Britain's electricity capacityauction last December leaving them too uneconomic to run.
Conn said the company hopes to sell its gas assets inTrinidad and Tobago but cautioned this may not be possible dueto weak oil and gas prices. ($1 = 0.6470 pounds) (Additional reporting by Kate Holton; Editing by Pravin Charand Keith Weir)
